Handbook  for  Solid  Waste  Officials

                     VOLUME II - DETAILED MANUAL
                         Lisa A. Skumatz, Ph.D.
                           CabeU Breckinridge

                               June 1990

    Funded jointly by the U.S. Environmental Protection Agency, Region 10,
        Solid Waste Program, and the City of Seattle Solid Waste Utility

                      VARIABLE RATES IN SOUD WASTE:

                        VOLUME II:  DETAILED MANUAL

In order to make a considered choice about whether or not (and how) to implement
a variable rate system in a particular community requires recognizing that the rate
structure is a critical piece of an integrated solid waste management system. The
choices are not independent  Each piece relies upon features of the others in order
to work to Its potential. Also choices made on some issues may limit the options
available on other issues.

Without education and access to legal or acceptable, convenient alternatives for
getting rid of waste, a variable rate system will not be practical. Without a variable
rate system, the incentives for waste reduction are missing.  Variable rates are an
important ingredient in improving the economics and incentives for recycling
programs (public or private). Variable rates are equitable, help reflect the relative
costs of waste management, and can prove a very important factor in working with
customers to achieve a solution to  the solid waste problem.

A move to a variable garbage rate  is  often viewed as an accompaniment to a
recycling system.  Variable rates and  an integrated approach to solid waste
management will likely increase recovery levels in a recycling program.  However,
every jurisdiction is different, and the decisions must be made in the context of the
jurisdiction's situation.  There is no  one rate and system configuration that can be
implemented "as is" into other jurisdictions.  In addition, the decision on whether a
change makes sense, although usually drivan by similar lists of factors (financial,
legal, political, customer-based) may ba drivan to completely different systems based
on the weights applied to those factors in the jurisdiction.

This manual assists solid waste officiate in analyzing a number of aspects related to
making decisions about solid waste system changes, with detailed emphasis on
factors related to changes to the fee system.  Although the manual is fairty long  and
detailed,   it has been organized in  a manner to try to step readers through the
complex issues involved in making  such an evaluation.  This manual includes six
major parts, each divided into sections within.  A table of contents is induced at the
start of each major pan


Part I: reastoJty - Does a variable fee system make sense for our jurisdiction?

      This part discusses financial factors that will help determine whether
      implementing a variable rate system makes sense for a particular jurisdiction.
      This includes an analysis of the variable cost  of collection and disposal, costs
      associated with waste diversion, and an analysis of the net costs or savings.
      It helps guide the reader through the techniques involved in preparing a cost-
      benefit analysis of variable rates and an integrated system. In addition, it
      addresses the political, legal, and community  relations feasibility of a system

Part U:Rate Design Considerations - Which variations on the basic fee system make
      the most sense for our system?

      This part assists a jurisdiction in making preliminary system rate design
      decisions and tradeoffs in terms of equity, incentives, implementation, and a
      variety of other factors. This section examines flat and variable fee
      alternatives, and examines alternatives for special customer groups.  These
      basic structural decisions are necessary before a detailed cost of service or
      rate study can be conducted. This part also  contains a fairly extensive
      analysis of the two primary volume-based rate alternatives, the variable can
      and bag/tag systems.

Part ffl: Conducting a Rate Analysis - How do we determine rates that cover our
      costs of service and provide effective incentives to the customers?

      This part walks analysts and decision-makers through the  basic steps and
      analyses needed to estimate a coherent system  of rates for solid waste
      services. The section discusses the cornpHcationa of estimating the amount
      and types of solid wast* service that customers  wi demand, determining
      revenue requirements, and the steps in making decisions on cost allocation
      and rat* design that wi affect the ultimata  calculated rates that the customer
      wi see and presumably react to.

Part IV: Operational Changes - Once we decide on a system and rates,  how do we
      go about implementing it and how long wi it take?

      This part discusses the operational changes that mutt be planned for and
      implemented based on the fee system selected.  It discusses timetables and
      considerations for needed changes in the collection system, customer service
      and billing system changes, and changes in  planning and other staff.

 Part V: Case Studies - What are examples of other with variable systems in place
       and what can I learn from them?

       This part summarizes basic characteristics of the rate structures and systems
       in a number of other solid waste jurisdictions, including large and small
       systems, and systems with private, contract, municipal, and franchise or
       licensed collection.  An evaluation of these case studies may provide insights
       into the appropriateness or success of particular system choices in
       jurisdictions with a variety of characteristics.

 Part VI: References  and Appendices

       This part of the report indudes a bibliography of helpful readings, contacts,
       worksheets, and computer aids.
There may be a number of reasons a jurisdiction considers modifying the existing
rates and solid waste system, including:

  o   reluctance to site new waste disposal facilities, or to extend the lifetime of
      current facilities,
  o   environmental concern,
  o   comply with state mandates or goals,
  o   need to move to different funding mechanisms,
  o   political or public pressure,
  o   desire  to reduce the coat of the solid waste system.

However, a change of this sort may involve a considerable upheaval of the current
system, with potential impacts on both customers and the jurisdiction.
Choices bv Customers

The switch to t variable rate system will allow many customers to have lower bills
than systems that charge si households .-». fixed or 'average' amount (either directly
or indirectly through tax mechanisms).  Those who have small households, or those
on tow incomes, or those who have traditionally kept waste to a minimum through
recycling or waste reduction, may especially welcome the introduction of a system

 that lets them achieve savings.  In jurisdictions that traditionally assess the fees as
.part of the property tax, customers with high property values will tend to welcome
 the change.

 This is an important feature of the switch to a variable fee structure - those
 customers who put out less waste will be able to reduce the level of their bill.  If
variable rates are the only system change, customers producing low levels of waste
 (either because they have always put out less waste or because they change their
 behavior) may be able to have lower bills than they had under the old funding
 mechanism.  How sweeping other changes in the  system are and the funding
 mechanisms selected for these programs will affect whether customers will be able
to actually save over the old system.
 Customers may save money from such a system in several ways:

  o   if they buy more carefully, and change the types  of items they buy toward
      those with less  packaging;
  o   if they recycle or reuse more through a variety of programs or actions,
      reducing the disposed waste;
  o   under a volume-based system, if they compact the waste disposed.

All of these actions wi lead customers to put out  less waste for collection.  What
and how they undertake these options depends on the local options available and
the local economics associated with the choice.

Under a  system of variable rates, customers will undertake these actions to reduce
waste up to the point  at which they feel their costs in terms of money, time,  energy,
and hassles, are balanced by the amount of savings they expect to realize.
Needless to say, as recycling actions or programs are more convenient, hassle and
time costs wi fall and more waste reducing actions wi be taken.  As the extra
amount that is charged for cofection of higher levels of wast* is increased, the
savings that can be achieved are increased, and the more waste win be reduced.
Customers wi find it worthwhie to make more efforts to reduce waste as the dollars
that they wi save by doing so increase.  And most important hkjh quality public
information is critical to slowing customers to use the system effectively. Providing
customers with good information on the system, the choices available to them, and
their potential benefits, wi reduce the energy, time, and hassles they must expend
in making their wssts behavior
However, it should be noted that customers may also tike actions that are
undesirable in their efforts to reduce their waste bis, including illegal dumping or
burning of waste, or carrying wssts outside the jurisdiction.  The incentive to choose
these options is increased as the hassles and costs of taking other actions  increase.

 and as the savings that could be realized increase.  Again, providing public
 'information and well-known, convenient waste management alternatives is.key to
 reducing the likelihood of this problem.
Choices bv Jurisdictions

The jurisdiction will consider implementing a new rates and solid waste system for a
number of reasons, including equity, incentives and efficiencies, legal mandates, and
more directly, the hope for cost savings.  These savings would come from a
combination of sources.  Variable rates and programs would tend to lead to lower
levels of waste generation and disposal as  customers learn to use the system more
efficiently.  Lower tonnage would reduce the collection and disposal costs to the
jurisdiction. In  addition, the new system may lead to improved utilization of recycling
programs. Of course, the savings would be based on a balancing of the level of
costs and the savings of the revised system - and the net effect will be affected by
the configuration of the system, the  strength of recycling markets, the effect on
customer  behavior,  and a variety of  other factors.

The jurisdiction's savings would come from  some or all of these sources:

  o   lower collection costs
  o   lower transfer/hauling costs
  o   lower disposal costs
  o   increased recycling revenues  from  higher volumes
  o   greater efficiency  in recycling  programs from greater use

The costs of the change would include some or all of the following:

  o   modifications to the billing system
  o   greater staffing for customer service
  o   pubic information costs
  o   materials and equipment for the changed collection system
  o   materials and equipment for the higher utilized recycling programs
  o   enforcement costs
  o   other administration costs.

The net savings depends on a variety of factors, including the relative tonnages,
costs of disposal vs. recycling programs  (and the way in which these costs vary
with changes in the relative tonnages), market prices, customer reactions to the fee
system, and many other local, program, and system-related factors.

These tradeoffs are also complicated by whether the decisions are based on short

 term factors or longer term analyses.  However, arguably, as a public agency a solid
 waste jurisdiction may be the most appropriate agency to consider the factors from
 a longer term point of view.

 The tradeoffs are also complicated by the fact that the tonnages, revenues and
 prices, and behavioral reactions are generally unknown, and the figures used are
 usually educated estimates.  Very often, landfill or other disposal facilities are not
 priced in a manner that represents the true economic value of that disposal  method.
 This skews the economic comparisons, generally in favor of spending less money
 for recycling and waste  reduction efforts.  In addition, a strict evaluation of the
 tradeoffs may not be possible if the jurisdiction must meet legislatively-mandated
 waste reduction/recycling goals.

 Unfortunately, these issues introduce a great deal of uncertainty into the decision-
 making process.  Uncertainties are why political and customer support are so
 essential.  No matter how  good the preparation, changes to a solid waste system
 will never go perfectly smoothly.  Support,  in terms of extra time and patience,
 money, and/or understanding, will be necessary at some point in a  period of
 changeover.  Making extra efforts in the early parts of the process to ensure good,
 comprehensive, and constant communication will be essential to successful

 An assessment of whether a change in rates or system makes sense will involve a
 great deal of work by a jurisdiction. The jurisdiction must first decide whether a
 change makes sense from a financial point of view, and whether to pursue a
 change.  Solid waste managers must then decide on the optimal structure of the
 rates from among the variety of options available, and  determine the effect it will
 have on customers, collection, costs, incentives, and the other components of the
 system.  Then, depending on the system selected, the process for calculating rates
 is likely to be a much more complex process.  The work wiU require gathering fairly
 extensive information on the system's interrelationships, costs, and services.  Finally,
the jurisdiction wffl need to do a  great deal of pre-planning in implementation,
 customer information, and support-building.  Tht whole process may seem


 Decisions on sold wast* involve a number of complex questions and issues.  The
purpose of this manual  it  to guide a jurisdiction through these complex
assessments.  This manual it designed to assist both  managers and analysts in
carrying out an organized, cornprshtnsivs, and consistent analysis  of the options
available  in their jurisdiction, and to alert the managers to a broad range of issues,
tradeoffs, and interdependences.


The manual provides information on possible solutions to problems that may have
been  used in other jurisdictions.  Because statutes vary in every state and'
jurisdiction, this document cannot be authoritative on legal issues; however, it alerts
the reader to issues that need to be investigated under local codes.  The document
also includes a number  of summary case studies, and references a number of useful
informational tools  and computer aids that may assist a jurisdiction in conducting
these  analyses.

What  has been teamed  during the research involved in this  manual  is that there are
several keys to developing a successful solid waste management system.   These
key ingredients include:  providing incentives to customers; providing a convenient
system with choices and a variety of legal alternatives for waste management;
providing extensive information on the system; doing high-quality planning and
integrated system analysis; and providing an integrated system that works together
to reinforce  solid waste  management goals and  objectives.

The conclusions reached via this research is that in a vast number of situations and
for a number of very good reasons, variable rates make a great deal of sense,
especially now. A  move to a variable rate system is especially appropriate as
recycling programs are considered,  although the rates can be implemented
separately.  Granted, such an evaluation involves a fair amount of work, but it is
probably worth the potential  rewards.

                             PART I: FEASIBILITY

      Introduction	  I  2

1.0   Financial Impact Analysis: definitions & assumptions	 I. 3
2.0   Variable Cost of Refuse Collection and Disposal: "Avoided Cost1	  I. 12
2.1    Variable Refuse Collection Costs	  I. 13
22   Variable Disposal Costs	  I. 20
2.3   Summary	  I. 28
3.0   Waste Diversion Cost	
3.1    Recycling Cost and Convenience	
3.2   Costs of Different Recycling Arrangements.
3.3   Projecting Volume Diverted	
3.4   Waste Reduction	
3.5   Illegal Dumping	
^j ^%
5.0   Poftical Feasfcity and Community Relations. ____
5.1    How Volume-based Rates Can Solve Problems.
      Likely Objections
5.3   Strategies for Building Support
5.4   Timetable for P.R. Phases
5.5   Costs of PubBc Relations
4.0   Cost of Disposal vs. Cost of Diversion:
            Comparing Section 2 and Section 3	  I. 54
7.0   Options for Fnandnq System Changes ------------- .......  I 70

      Summary. --------- .......................... --------------------------- ........................  »• ?3

                                TABLE OF CONTENTTS
VOLUME I:  OETALED MANUAL                                             Eiflfi
   1.0  Financial Impact Analysis.	,
   2.0  Variable Cost of Refuse Collection and Disposal..
   3.0  Waste Diversion Cost	-	
   4.0  Cost of Disposal vs. Cost of Diversion.	
   5.0  Political Feasibility and Community Relations.	
   6.0  Legal Changes.	
   7.0  Options for Financing System Changes.	
   8.0  Summary	
. 29
   1.0  Flat  Fee Rate Options.	..	..	II. 5
   ^0  Volume-Based Rate Options.	-	II. 12
   3.0  Additional Volume-Based Rate System Issues.	ll. 31
   4.0  Rate Options tor Low Income Customers.	-	II. 64
   5.0  Rate Options for Multi-Famtfy Buildings....	~	II. 69
   6.0  Summary[[[	II. 74

   1.0  Estimating Demand.	-	~	III. 6
   2.0  Revenue Requirements.	„	III. 22
   3.0  Cost Allocation...			-.. III. 29
   4.0  Rate Design and Calculating Rates......		ill. 36
   5*0  Sunvntty**•«•««*••*«*•••*«••••••««••••••••••**•*•*••••«•*»••••«•••••*•••«••**••••«•••*••••*••••*•**•••*•**•*•*	«•• ill* ^Q
   1.0  Collection and Customer Service Changes.		-	(V. 5
   2.0  Biflng System Cnanges........~.	.................^	~		IV. 17
   3.0  Planning Depeitment Changes.		IV. 20

   5.0  Summary	I		iv. 25
   V^AnT wm WMQB *H«KnG&***« ••••«••«*•»*•••••••••*•••••••••••*•••*«•••••*•*•»*•**••••»«*••*•••**•••••• *••**••*.•••* V* l

                                                                  	V. 4<
   3.0  Overviews of other Jurisdictions.	..				~	V. Si

   1.0  Bfefiography	~	-	vl 2
   2.0  Appendix A: Worttsheet and Computer Aides.	-	VI. 9


This section discusses whether a volume-based rate system is a feasible proposal
for your community.  Feasibility is discussed in three areas:

     * Financial Impact Analysis.  Sections 1 through 4 compare the cost of disposal
      systems with the cost of diversion systems.
     * Political Feasibility and Community Relations.  Section 5 discusses political
      issues that can be involved with a rate system change.
     * Legal Changes.  Section 6 discusses legal  requirements for a volume-based
      rate system.

Because a volume-based, rate system is often implemented along with a city-
supported recycling prdgram, recycling is discussed in depth in this section.
Volume-based rates and recycling are in fact two  parts of the same system.
Consideration of recycling along with issues of volume-based rates allows for
"integrated" planning  -  planning that takes note of system wide effects of rate

This feasibility section cannot be complete for every jurisdiction, since volume-based
rates may be a good idea in a particular community for  any of a variety of reasons.
This part does discuss several factors which are worth considering as part of the
solid waste planning  process.

This section discusses the potential benefit  of an altered solid waste system, but
does not discuss the cost of changing the  operation of a solid waste agency  so that
it can perform .the new tasks that a changed system would require.  For a
discussion of issues involving changes in the operation of the solid waste agency,
please see Part IV: Operational Changes.
                                      I. 2

                       1.0 RNANC1AL IMPACT ANALYSIS
A move to a volume-based garbage rate system is often viewed as an
accompaniment to a recycling system.  This section concentrates on a comparison
of disposal and recycling costs, and on the changes in system use that volume-
based rate are likely to cause.

Communities institute recycling programs for reasons ranging from reluctance to site
new waste disposal facilities to concern about national and global environmental
issues to the requirements state law.  Often, however, recycling programs are
implemented to save money.

Volume-based  rates  are likely to increase recovery levels of a recycling program.
The  purpose of this section is to determine how much money your community
stands to save (or maybe loset) by recycling material instead of sending it to a
landfill or incinerator.
            Diverting waste wffl save money on the refuse coiection side and cost
      money on the recycling side.  The equation betow combines the savings
      and costs that resuft from diverting waste to  determine the "net ftnanaai
      impact* of diverting one ton.
      Strings, (or loss)
      that resolts fro*
      recycling  one toa
Coat caved by
not disposing of
oa« toa
('Avoided Cost-)
Cost of
one ton
The rest of this section discusses the equation above in detail.  For ease of
comparison, costs are discussed on a per-ton basis.  Per-ton analysis of fixed costs
requires a reliable projection of tonnage.  Communities which lack confidence m their
tonnage projections may wish to devise another method for comparing the costs
discussed here.

This section concentrates on the long term impact of system changes, and does not
consider one-time costs associated with system changeover.  Costs of changing the
operation of the solid waste agency are considered in Part IV of this  manual.
                                    I. 3

 Every jurisdiction is different and some issues related to waste diversion incentives
 in your community may not be addressed here. Political, environmental, and other
 pragmatic concerns can be more important than financial concerns to a community.1
 The feasibility discussion presented here offers suggestions for analysis, but cannot
 cover all aspects of a possible system change.

 Some communities, especially those which have functioning recycling programs, may
 have performed  a version of the avoided cost analysis described in this section.
 Communities which have performed this analysis could still be interested in other
 impacts of volume-based rates, especially costs associated with  large scale changes
 in recycling volume, the increased importance of a recycling program under a
 volume-based  rate system, waste reduction programs, and illegal dumping and
    1Jon Root, of Santa Monica Recycle in Santa Monica, Ca., reports that recycling
in Santa Monica costs nearly three times as much as disposal. Santa Monica pursues
recycling for a number of reasons, including a potential increase in the City's disposal


 Definitions and Assumptions

 The information in this section is geared toward a long-range view of waste issues,
 or a "20-year approach."  This approach allows the  implementation of strategies
 which may not be cost effective for the first several  years of operation, but which will
 be  very cost effective over the 20 year life  of a program.

 In order to compare short and long term cost situations, costs for programs and
 services should be characterized according to their responsiveness to changes in
 tonnage of refuse.
                           Coot f^^uaftut ituiM M^ Terms'

            The important cost-characterization terms in this section are:
          o Short run variable cost Costs which vary fairly quickly with
            changes in quantity processed. Examples are overtime tabor,
            vehide operations and maintenance costs, and contract costs
            based on tonnage.

          o Long run variable cost Costs which vary with quantity
            processed only after several years. Examples indude most
            labor (when the size of the workforce is alowed to change)
            and equipment cost

          o Fbcsd costs: Costs which do not vary with quantity processed.
            Usually refers to buildings or land, but can also indude costs
            which would only vary with larger  quantity changes than a
            community expects to experience.  Examples of costs which
            can be fixed indude administrative staff, machinery operating
            betaw its capacity, and promotion costs.

          o Marginal Cost The cost of performing the next unit of service.
            In this section, marginal cost usually refers to the cost of
            increasing, racydtag program convenience to the point where
            om mom ton of material win be recyded.
From time to time throughout the remainder of this section, information is presented
on which costs are likely to be fixed and which are likely to be variable.  Each
jurisdiction is different however, and the final determination of the character of a
jurisdiction's costs must be made by the reader.

The most important concept in this section is avoided cost  Avoided cost, which
can also be thought of as garbage system savings, is the amount of money that a
city saves by QQt sending a ton of waste to a landfill or incinerator.  Refuse
collection and disposal costs are avoided whenever customers keep material out of
the disposal stream, whether by waste reduction or by recycling.
     Avoided Cost is the amount of money that a community can save by not
     disposing of one ton of waste. Examples of ways in which cost can be
     avoided include:
Reduced transfer cost
Reduced landfling or processing cost
Avoided Cost and Private Recycing
                            P«r Ton Co«t
Determining avoidable
cost is the same as
determining variable
cost of refuse collection
and disposal.  To the
extent that costs vary
with volume of waste
disposed, reduction of
disposal volume will
result in system
savings, or avoided

Figure  1 provides a
graphic representation
of costs that are
avoidable through
private recycling efforts.
The avoided cost line
represents the amount
of money a city can
save by not disposing of one ton.  The quantity Qm is the number of tons of
material diverted from the waste stream by private recycling. The area of the
shaded region (Qra x Avoided Cost) represents the financial benefit to the city of
private recycling.  This  is cost that the city avoids without incurring additional cost or
                                      Quantity of Materials Recycled
                        Rgure 1
                        Qm: Quantity  of  Material  Recycled by the Private  Sector
                        Without Government Support
                                     I. 6

                                                Ton Coot
                                           •1 Ol««rttn« «*•*«• :
                                            _ City Mocycltoa
                                         (Contract Collection)
                                           •or TM Coot
                                             City Bo cycling
        iThno) —»
Figure 2
 Mature Recycfng

 The level of additional
 avoidable costs
 available to the city
 provide a good guide
 to the amount that the
 city can  efficiently
 spend on its recycling
 Unfortunately, recycling
 programs do  not
 immediately reach their
 full recovery rates.
 Therefore, recycling
 programs do  not benefit from economies of scale until later in their life.

 Figure 2 illustrates  the process by which a recycling recovery rate  can "ramp up" to
 its long term level.  The graph also depicts the drop in per-ton recycling costs that
 result from economy of scale effects. A "mature" recycling program is a  program
 which  has finished  ramping up and has achieved sustainable rates of recovery and
 per-ton cost  [The line
 marked "contract
 collection* is flat
 because of a
 simplifying assumption
 that cities can
 guarantee themselves a
 particular per-ton rate
 by  contracting for
 recycling service.]

 Customers tend to
 participate more
enthusiasticily and in
greater numbers in
recycling programs that
are convenient for
them.  Unfortunately,
increasing program
    P«r Ten Co«t
               Quantity of Materials Recycled

convenience also results in an increase in the per-ton cost that the city incurs by
providing recycling service.  Figure 3 is a simplified illustration of the marginal cost
of diverting one more ton of material to recycling at various levels of recycling
diversion and program cost.

Figure 3 does not reflect economies of scale because it addresses a choice
between mature recycling programs, which have already benefited from economies
of scale.  This marginal cost curve starts at zero and answers the question "how
much more would we have to spend on convenience to increase recovery under our
mature program by one ton?" As a program captures more and more easily
recovered recycling material ("low hanging fruit"), the cost of  increasing recycling
recovery rises.

 LJflciont Level of Cost and Convenience

 A fundamental question of recyding program planning is how convenient (and
 expensive) a program should be.  As a rule of thumb, recyding program
 convenience and cost should be increased until the cost of recyding one more ton
 of material is equal to the cost avoided by not collecting and disposing of that tori.
      Per Ton Cost
                                                   Per Ten Marginal
                                                   Cost of Mtture
                                                  Recycling Program
                                    Net Ceitt
                                  Avoided Through
                                   City Recycling
         Financial Benefit
         Private Recycling
 P«r Ton
                                    Qf«          Q"
                     Quantity of Materials  Recycled
  Figure 4
  Q : Quantity of material diverted under a mature, economically efficient recycling
  program, combined with private recyding.
Figure 4 illustrates the ideal cost/convenience of a recyding program, and the net
financial benefit of pursuing a recyding program at that level. A complication of the
rule of thumb described above is that short run avoidable cost and long run
avoidable cost art rarely equal, and long run avoidable cost (which indudes short
run avoidable cost) is almost always larger. If a recyding program began to recover
materials at its mature level immediately, some portion  of garbage system costs
would drop quickly (short run variable costs), while other costs  would adjust only
after a long adjustment period (long run variable costs).

 Short Run and Long Run Avoided Cost
                             A; tMrt HUH AnM«*« CM!

                                                       C, flm* CMt
Figure 5 provides an
example of the path
total refuse collection
and disposal costs  can
take in response to an
instantaneous reduction
in system volume.
These alternate
versions of avoidable
cost force solid waste
officials  to decide which
figure to use for
recycling program
planning.  The "20-year
approach" mentioned
above recommends
planning on the basis
of long  run avoidable
cost since a recycling
program which could
be an excellent financial
move in the long run could break even or possibly lose money in the short run.
                                Tlm«  -»
                         Figure 5
                         T*: Point in time when refuse system volume drops by (Q*
Figure 6 represents the
different net financial
effects that the same
recycling program can
have in the short run
and the  long run.
While recycling
spending beyond the
short run avoided cost
(region C) may appear
wasteful in the short
run, it can be viewed
as an investment in the
community's solid
waste future, as fiture
benefit can outweigh
both current cost and
future cost
                             P*r Ton Coat
                                     CMt •« M«t«r*
    A • C • Short Run Financial Impact of City Recycling

     A * • • Long Run Financial impact of City Recycling
      Financial Benefit
      Private Recycling
                                             (Short *un)
               Quantity of Materials Recycled
Figure 6

In Figure 6, the short term costs of not recycling are represented by regions A+D.
The short term costs of recycling are represented by C+D.  Therefore, the
difference,  or A-C gives the short term financial impact of recycling.  Likewise, the
long term cost of not recycling is given by A+B+C+D.  The long term cost of
recycling is C+D, so the long term financial impact of City recycling is the difference,
or A+B.

The analysis above described the ideal relationship of recycling cost to avoided
cost: that recycling should be made more convenient until the cost of increasing
recovery through increased convenience exceeds the avoided cost of disposal.

The results of such an analysis can be useful to communities deciding either:

  o   Whether the relative costs of recycling and disposal in their community justify
      increased incentives to recycle; or
  o   How convenient their recycling programs should ideally be.

Parts 2 and 3 of this section are devoted to identifying short run, long run and fixed
costs of refuse and recycling systems so that your community will have the
information necessary to approach planning questions using this  analysis.

Part 4 is a  guide to comparing the results of Parts 2 and 3  • that is, using avoided
cost analysis to compare system wide planning options.

 j        ^•^^•••'•••il^ta^BKaB^Bk^K^K^KAM^KAM^fcjaMBM^M^B^^^^KJK^^^lV^BMA^BMdBHhAJfl^MjK^^taM^K^^K^W

 In order to accurately estimate the financial impact of a change in the way a city
 operates its solid waste system, it is necessary to determine how much cost the city
 can save by reducing the volume of material that its refuse collection and disposal
 system must handle.  This section helps create an estimate of this "avoided cost1 by
 providing detailed information on refuse system costs and their variability.
                  Two important avoided cost identities are summarized
            in the equations below:
      Aroided Cost
Variable coat
of  tfce Refuse
Disposal Syste«
      of  the Refuse
      Diepoeal  Systeai
Variable Cost
of Refuse
Variable Cost
of Refuse
This discussion of collection and disposal costs is divided into two sections.
Variable Refuse Collection Costs (2.1) discusses the variability of costs associated
with providing refuse collection through various arrangements.  Variable Disposal
Costs (2£) discusses the variable cost of handling waste from the time it is
unloaded from the collection trucks to the final disposal of the waste.

Costs of disposal, rather than collection, often make up the bulk of avoided costs,
especially in the short run.

 Because of the important public health role played by refuse collection services,
 there is often a fixed lower limit to refuse collection costs.  Public health concerns
 generally require enough trucks  and collection crews to service each dwelling once
 per week (or twice per week), regardless of volume.

 Savings that can become available as a result of reduced refuse volume result from
 three changes in collector activity:2

      1.    Less time is required at each house as average subscription levels
      2.    Fewer trips per day are required to the transfer station, landfill or
      3.    Reduced frequency of garbage pick up.3

 The  net effect of the changes described above is likely to be a reduction in the
 amount of labor and machinery  required to provide refuse  collection service.  The
 manner in which savings from reduced volumes present themselves depends on the
 details of the arrangement through which a community's refuse is collected.
            Common refuse coflectton arrangements fnduda:

               U llurtdpal  Coiect^                          by
                  munidpal employees using municipal trucks.
               2. Contract Gofectfan: The rnunjcipafty pays a private
               '  ' company to coftect refuse; the company uses its own
                  trucks and personnel.  ••  : ••••'••• •.•..••••\-:..--.?^.~:-
               3» Franchise) Cofsctiont Tha counicipaity yrants a private
                 - haufttQ. company a faftjaa cottacbofi monopoly and, in
            •-' ^' eacfcangsptfagUatas, th*>  company's  rates • and:
                "*'partomaniistandards. '••^'^•••^^^•^:.,.^ *-:-:.
               4* ftfvafcfr Colscfiorc Privati companies oompets 0n
    Operational changes resulting from a shift to volume based rates can lead to
costs that will offset some savings. Sea Part IV.

    3For example, cities collecting twice each week can instead collect refuse on ore
day and recycling on the other day.

 A city's refuse collection arrangement determines the form that costs of refuse
 collection will take.  The remainder of this section discusses in detail the variable
 cost of refuse collection under each system-toe "avoidable" portion of refuse
 collection costs.

 Municipal Collection

 Costs of providing municipal services are often underestimated because use of city
 equipment, facilities and worker time are frequently covered by revenues from the
 general fund.  In order to accurately measure a city's cost of providing a service,
 associated  strain on city resources - such as efforts of people employed by other
 city departments, for example - must be evaluated and considered.4 9
                     Fourth! Cdtocfon Savings - Municipal

     Collection costs that can be saved Irtducte potwtttat savings in latxar costs
     and equipment costs:
Real savings within the government apparatus may be difficult to bring about
Planners should carefufly identify and verify potential collection savings before
including them as part of the avoided costs used to justify a major system change.
Labor costs, in particular, can be difficult to reduce.
    *£S. Savas, "How Much Do Government Services Really Cost?", in Urban Affairs
         Vol. 15 No. 1, Sept 1979, pp.23-42.
    5For information on worksheet systems that can provide a step-by-step guide to
accurate municipal accounting, please refer to Appendix A: "Guides, Worksreets and
Computer Aids to Solid Waste Decision Making."

            For reasons  of po&tics, tradition and law,  it is often very
            dflteuft  for a city department to  reduce  the  size-  of  its
            workforce.  Therefore* collection tabor savings avatiabfe to a
            city wH! probably include:
                f.  Reduction In overtime pay
                2. The opportunity to transfer workers to other areas of
                     cftjr government ••      •     -. '•  .:
If collection, maintenance and administrative workers are currently working a large
number of ovarUnie hours, reducing volume collected can result in a reduction in
overtime labor cost  Overtime labor is expensive, and can sometimes be reduced
without contractual difficulties.  Temporary types of labor may also be reduced.

Where workers are not currentiy working a significant overtime, it may be possible to
transfer workers to other city programs.   This opportunity is particularly appealing
where refuse and recycling programs are both municipally operated.

Ideally, refuse collection staff could be transferred to recycling operations at the
exact rate that customers divert waste from disposal to recycling.  In this way, refuse
collection savings would exactly offset recycling cost increases.  In reality, it may be
necessary to hire temporary staff to accommodate recycling peaks and valleys that
can occur during the introduction of recycling incentives.

During the implementation phase of a new rates and/or recycling system, the
customer service workload could increase temporarily.  Hiring customer service
representatives to help with the increased workload until the new system is  widely
understood can help reduce permanent increases in labor costs.6

Equipment costs can be reduced in three ways. First fewer hours of operation will
allow  trucks to last longer, which should reduce the amount spent annually  on
replacement equipment  Second, fuel, oil and other operations costs will be
reduced.  Rnaly, labor costs associated  with truck maintenance can  be reduced.

Ideally, jurisdictions operating both recycling and refuse collection services could
tra:isfer vehicles from refuse to recycling service as customers' disposal habits
    'For more information on implementation, see Part IV: Operational Changes

Contract Collection

When a city contracts for refuse collection service, the variability of collection costs
depends entirely on the terms of the contract.  A contractor may face a more
variable set of costs than would a city providing the same service, and therefore a
contract arrangement can often increase the portion of refuse collection costs that
vary with volume collected.
                      Potecrtiai Cofoction Savings - Contract
Savings available
according to
Contract T«
Contracts can be written to vary in a number of ways. Adjustment usually occurs
once a year.  Frequently used variation schemes indude:

1.    100% variable by tonnage.  Such a contract would provide excellent avoided
      cost opportunities,  but would require the contractor to absorb a great deal of
      fixed-cost risk.  A contractor would probably want to receive a higher
      payment in exchange for taking such a risk.

2.    Partially variable by tonnage, partially variable  by number of structures.  This
      is the form of Seattle's contracts with its haulers.  To determine the amount
      owed by the  city to the  hauler for a year, half of the previous  year's total
      charge is adjusted  (probably upward) to reflect the number of new structures
      constructed in the service area  The other half of the  previous year's total
      charge is adjusted  (downward, we hope) on the basis of the change in total
      tons disposed.  The two halves are re-combined,  and then adjusted (definitely
      upward) for inflation.

      The appeal of a contract organized in this way is  that it  allows reduction m a

      contractor's costs to be reflected in reduced costs to the municipality without
      creating the high level of risk of a contract based entirely on tonnage.

3.    0% variable by tonnage.  This traditional arrangement does  not allow
      collection savings on the basis of volume reduction. Instead, the municipality
      pays the contractor either a flat annual fee or a per-household fee.

      An interesting  variation of this payment scheme is used in Readington, New
      Jersey, where  the Town pays a contractor a flat fee for collection service, and
      pays for disposal by the  ton. Customers must  purchase stickers from the
      town and attach them to every bag or can of garbage.  Proceeds from the
      sale of stickers cover disposal costs.7

Franchise Collection

Although the municipality does not have to pay directly for refuse collection service
provided under a fnmchioo agreement, the municipality grants the  franchised hauler
a local monopoly and acts as the agent of ratepayers in franchise agreement
negotiations, including rate setting negotiations. If the municipality requires a
volume-based rate structure, customers will have the opportunity to reduce the bills
they pay by reducing the waste they generate.
                 Potential Cotoctfon Sevtngs - Franchise or Piivate

     Savings avaBabto m * reeutt of reduced franchise or private collection cost
     wX not generafly be avaBafate to « government agency, but rather w$ benefit
    7Wayne  DeFeo,   Deputy  Director,  New  Jersey  Board  of  Public  Utilities,
correspondence January 16, 1990.

Costs avoided by reducing disposal collected by a franchise hauler will not benefit a
local  government directty, but rather should benefit ratepayers through reduced
garbage bills. For political reasons, a city considering moving to a variable rate
franchise system may wish to structure rates so that customers at  low service levels
will pay less than they did under the old flat rate system.

If a city operating under  a franchise agreement wishes to apply  avoided cost
benefits of reduced disposal  to a publicly supported recycling program, the city can:

1.    Require coflection  of recydables as a ccfioltkxi of trie fraricriise agreement

      Requiring collection of recydables as a condition of a refuse franchise
      combines the benefits  of avoided cost and the costs of recycling programs
      into one  package.  By making both effects the concern of a private firm, such
      an  arrangement allows avoided cost benefits to be applied to the cost of
      recycling service.

      The franchisee's recycling program obligations should be  spelled out in detail
      in the franchise agreement A financial incentive to increase  waste diversion
      can help inspire a franchisee to create a successful program.

      Where a recycling program is funded entirely  by a franchisee's rate revenue,
      the addition of recycling service can increase  per-unit costs. (Collection of  one
      can of refuse and  some amount of recycling will cost more  than collection  of
      one can  of refuse  alone.)

2.    Pay for recycling cofcection with funds from Jixithor source.

      Municipal recycling, contracted  recycling, or private recycling diversion credits
      can be financed by the general fund, from a refuse collection or disposal
      surcharge, or by charging residents for recycling collection  service.

      Under this type of arrangement the avoided cost • diversion cost comparison
      can take the form  of the difference between the increased tax or rate burden
      associated with a  new recycling program and the savings available through
      reduced  refuse disposal.

 Private Collection
 Under some circumstances, it may be possible to require private waste haulers to
 charge volume-based rates through a licensing process.  More often, private haulers
 can be persuaded that charging on the basis of volume wl increase their
Customers naturally prefer to pay as littie as possible for refuse service. A company
which charges small waste generators less will win business from the flat-rate
competition.* A flat rate billing system requires small generators of solid waste to
subsidize larger generators.

Several communities, including Perkasie, Pa.(Pop. 5,241), and Holland,  Mi.(Pop.
30,000), sell pre-paid garbage bags - whose cost includes the cost of their collection
and disposal - to customers not wishing to subscribe to private collection service.9
The communities pay a portion of the cost of the bags to a hauler, who agrees to
collect them during regular collection rounds.  Collecting the bags offers the hauling
companies the  opportunity to increase their market share.

Private waste haulers could be persuaded or required to charge for refuse collection
on  the basis of volume through a license or through pian requirements. Depending
on  local law, actually setting rate levels could require a franchise agreement
The avoided cost benefits that could result from the adoption of a variable rate by a
private firm could be applied to a recycling program in one of the ways discussed in
the "Franchise"  section above.
    "A company whose costs are primarily related to the "stopping cost" - the cost of
driving to each customers home - rather than volume based costs may not be able
to charge smaller generators significantly less than larger generators.

    •Marvin G. Katz, "Collection Strategies of the  Nineties?" in  Waste Aoe.  February,
1989, p.SOff.


The majority of avoidable costs of waste collection and disposal systems are variable
costs associated with disposal, the landfilling and/or incineration (or waste-to-energy
processing) of solid waste.  By not disposing of one ton of waste, a community
receives financial benefit equal to the variable cost of disposing of that waste. This
section provides a guide to evaluating the true "Variable Cost of Landfilling" or
'Variable Cost of Incineration or Waste-to-Energy Processing" that your community

Beginning with transfer and hauling costs, this section identifies several categories of
expense that can be associated with waste disposal.  By evaluating and summing
the expenses associated with each category, an estimate can be generated of total
system cost and of the portion of that cost which will vary with changes in system
volume.  Costs which vary  with system volume are avoided costs.

Costs for two or more categories may be presented as a single expense. Where a
contract covers two or more categories  of costs, such  as hauling and tipping, the
charge for  the two services should be counted only once.  Likewise, if future
disposal costs will be presented as a transfer-hauling-disposal package, future cost
calculations should be based on a comparison between the cost of the future
disposal package and the costs currently incurred for that portion of the existing
disposal process.

The set of  costs mentioned here is not necessarily complete. It should serve as a
guide to the types of costs that are likely to be associated with waste disposal.  The
level of avoided cost in your community will be determined by the details of your
community's disposal strategy. -

 Variable Cost of Landfillina
                   The cost of iandfiliing is the sum of the costs listed
             here.  Some of the categories of cost discussed here may
             not apply to your situation.

                   1«  Transfer Station Costs
                   Z  Hau«ng Costs
             .  :    3r  Current. Tipping Fees
               ••   4.  Future Tipping  Fees   '    '  •'•::'"•••  "•
                   5.  lanes* Closure and Re-siting
                   &  Environmental Costs
The descriptions below are designed to help determine the variable cost of waste
disposal through landfilling.  Costs are calculated on a per-ton basis so that they
can easily be compared with per-ton collection and recycling costs determined in
section 3.0 (Waste Diversion Cost).

The variability of insurance costs depends on the terms of the city's policy.

1.  Transfer Station Costs (partially variable)

Where transfer service is contracted, variable transfer station costs are  determined
entirely by the terms of the contract

Costs of municipally operated transfer stations indude labor and machinery costs.
Variability of labor costs is determined by the amount of overtime employees are
currently putting in and by the level  of hiring flexibility available to management.

Per-ton costs associated with  purchasing machinery can be calculated  by dividing
the purchase pries of the machinery by the number of tons that it can  be relied on
to process during its life. Additional machinery costs indude regular operations and
maintenance costs.

 2.  Haufng Costs (partially variable)

 Where hauling service is contracted, variable hauling costs are determined entirely
 by the terms of the contract

 Hauling costs consist of wages paid to drivers and costs associated with trucks.
 Variability of labor costs depends on current level of overtime or temporary staff, and
 the provisions of the contract with the drivers union.

 Truck costs are the purchase price of the truck (divided by the number of tons it
 can be relied upon to haul), routine operations costs, and projected maintenance
a  Current Tipping Fee (usually entirely variable)

The current tipping fee is the amount a municipality must pay to deposit material in
a landfill.  Where the municipality owns its own landfill, there is generally no current
tipping fee.
4.  Future Tipping Fee (entirely variable)

Assuming a community has a fixed amount of space left in the landfill it currently
uses, and that the community knows its future disposal costs and knows they will be
higher, there is a cost associated with hastening the approach of future (higher)
landfill costs.

After a community uses up the space in its current landfill, the community will have
to send its refuse elsewhere,  often at a high financial and political cost  There is a
financial benefit to postponing the day when the community win face  higher tipping
fees.  Likewise, the community suffers financially when the era of higher tipping fees
is brought closer by depleting current landfiN  resources.10

For example, a community which pays a $50/ton tipping fee at a local landfill-bat
knows that after 100,000 tons or so it will have to pay $120/ton at a waste-to-
energy plant-saves more than current tipping fees by diverting a ton from the landfill
    "Jeremy K. O'Brien. "Guidelines for Implementing Cost Effective Curbside Recycling
Programs." HOR Engineering, Inc., Charlotte, N.C., 1989, p. 4.


            This equation provides a good estimate of the hidden cost that
      higher future disposal costs represent
                                 community currently pays.
                 coet» ** present dofers, of the cfisposat option that your
      cormwnay wi us* wtwn currant tandQI capacity runs out

      If Se; The number/* years that your community wi be able to
      continue to tip at your currant landfB at your currant disposal rate.
          The "reef interest rate-the (merest rate the dty earns on its assets
      less a projected inflation rats* "'    '"'  •••"••• ••.-•'-:,: :: •.;•... ?.<•-;.,...  .,-
           Cost of
5.  LandM Closure and Ro siting (entirely variable)

Depending on your city's legal situation and opportunities for future disposal,
exhausting current landfi capacity can result in several very large one-time expenses
and a number of difficult political questions.  There is a financial benefit to delaying
those expenses, and therefore a financial cost to bringing them closer.

Cities which own their own tandftto are likely to be responsible for landfill closure
costs, and cities which pay a contractor a tipping fee may also bear some closure
responsibity.  Closure costs can be extremely high-Seattle's costs of dosing two
old landfHs is currently estimated at $76 million.  CoinodentaJJy, the Seattle Mariners
baseball team was recently purchased by an Indianapolis businessman for $76

Changing environmental regulations add an  element of risk to the future prospects
for siting new landfills.   In  some cases, siting a new landfill will be impossible, and a

 community will nave to contract for future disposal. Where the city will not have to
 perform re-siting itself, re-siting costs will be included  in the per-ton tipping fee
 charged by a contractor, and can be considered as future tipping costs.
      IF flte: The number of years that your community wi be ajbie to continue
      to tip at your currant tancW at your current disposal rats.
      f: The interest rate Avaftabfe to the city
      CHS Cost The cost that a cornrnunfty wi have to pay for landM dosure
      and/or re siting^;
U*M»*«    '
                                         TOM Disposed par I<
6. Enwonrnental Costs

Construction of a new landfill requires an environmental impact statement in many
states.  Such a statement should make dear the environmental problems associated
with the creation of a new landfffl.

The strain that use of an existing landflR places on the environment is not a purely
economic issue, and it is sometimes possible to perform local economic analysis
without consideration of this type of 'global issue." Stffl, the damage to the  landfill
site and its surrounding area and the depletion of natural resources that waste
disposal represents are  very real costs of landfflflng.  Communities may wish to
create a proxy value  of environmental costs, or may wish to use environmental   -
considerations as a "tie  breaker" if other factors do not argue decisively for or
against watte reduction or recycling strategies.

                   The cost of incineration or WTE processing & the sum
             of the costs listed here.  Some of the categories of cost
             discussed here may not apply to your situation.
                   1.  Transfer Station Costs
                   2.  HsuingCosts •-•   ;... ..,.:•  •
                   &  Current Tipping Fee
                   ^T*.-- bsWAWnCX COSflf  :
                   Jfe - • C?Mte.J^Mfc^MAMK4^^^SfMft ^^d^^MSik  • i - - " '
                   %. aimonrnenai Cmw*  ..-..:-%:,
                   &  Cost of "Put or
The descriptions below are designed to help determine the variable cost of waste
disposal through incineration or WTE processing.  Costs are calculated on a per-
ton basis so that they can easily be compared with per-ton collection and recycling
costs determined in other parts of this section.
1. Transfer Station Costs (partially variable)

Where transfer service is contracted, variable transfer station costs are determined
entirely by the terms of the contract  Transfer station costs include labor and
machinery costs. Variabiiity of labor costs is determined by the amount of overtime
employees are currently putting in and by the level of hiring flexibility available to

Per-ton costs associated with purchasing machinery can be calculated by dividing
the purchase pries of the machinery by the number of tons it can be relied on to
process during its We.  Additional machinery costs include regular operations and
maintenance costs.
Z Hsufng Costs (partaJty variable)

Where hauling service is contracted, variable hauling costs are determined entirely
by the terms of the contract

 Hauling costs consist of wages paid to drivers and costs associated with trucks.
 Variability of labor costs depends on current level of overtime or temporary staff, and
 the provisions of the contract with the  drivers union.  Per-ton truck costs are the
 purchase price  of the truck divided by the number  of tons it can be relied upon to
 haul over its life, routine operations costs, and projected maintenance costs.

 3. Current Tipping Fee (usually entirely variable)

 The current tipping fee is the amount a municipality must pay to deposit material at
 an incinerator or WTE plant  Where the municipality owns and operates its own
 incinerator or WTE plant, there is sometimes no current tipping fee.
4.  LandfVng Costs (usually entirely variable)

While an incinerator or WTE plant will reduce the amount of material that a
community will have to landfill, the community will still have to landfill a significant
amount of material. Landfilfing costs can be induded as part of the incinerator or
WTE plant tipping fee, but often landfiiling costs are the responsibility of the
community that brings material to the incinerator or WTE plant

Although incineration can reduce the volume of material incinerated by 70-90%,
rarely is ash the only material that a community using incineration needs to landfill.
Other materials that need to be landfilled includes materials unfit for incineration
(white goods, large tree stumps, etc.) and materials that bypass the facility during
maintenance procedures.  Typically, burning garbage reduces a community's total
need for landfiiling by about 50%." Landfiiling costs for bypassed material can
indude ail of the costs discussed in "Cost of Landfiiling.' above.

The cost of landfiiling indnsfitof ash depends on the amount of disposal treatment
required by state or federal regulations. As of 1989, the EPA had passed no strict
requirements for treatment of incinerator ash. According to citation 40 CFR 261.4B1.
treatment depend* solely on the hazordous content of the waste fcejoja  incineration.
Ash produced from household waste can be landfilled in the same manor as
untreated household waste. Changes in  ash landfiiling law - including a proposed
requirement that communities using incinerators or WTE plants recycling 25% of their
    "Municipal Incinerators: 50 Questions Every Local Qcvemmetit Should Ask, by
R.W. Beck and Spiegel and McOiarmid. Washington, D.C.: National  League of Cites,
1988. P. 6.

 municipal waste - could have a major impact on avoided cost calculations.12 Many
 states already have stricter, more costiy treatment regulations.13
5.  Environmental Costs

The strain on the environment that is associated with incinerators and WTE facilities
is difficult to measure financially, but the effects of air emissions  and landfilled ash
should be analyzed and carefully considered.

Every refuse combustion facility is different, and produces a different degree  of air
pollution.  State of the art air quality control equipment can be effective - but
expensive.   Its cost is reflected in the tipping fees a community pays.  Particle and
gas pollution that does escape from the facility contributes to global air pollution,
climate and ozone depletion problems.

Landfilled ash presents a different set of hazards than does  landfilled municipal solid
waste. Handling and processing procedures can help reduce the environmental risk
associated with  incineration, but added cost of handling and transporting of ash can
be  considered a cost avoidable by  reducing waste disposed.
6.  Cost of "Put or Pay Guarantee*

A "put or pay* guarantee, which cities sometimes offer in exchange for lower
incinerator tipping fees, is an agreement by a municipality to pay an agreed amount
to the operator of an incinerator or WTE facility for every ton by which the
municipality undershoots its guaranteed level of facility use.

If your community's agreement with a refuse combustion facility contains a put or
pay guarantee, avoided cost benefits from waste diversion may be limited.  Once
disposal has been cut below the "guaranteed" level, the per-ton avoidable cost of
disposal is reduced by the amount of the per-ton penalty fee.  Still, a significant cost
reduction could financially justify agreeing to such a guarantee.  An put or pay
agreement between a fad&ty and a group of communities can increase the flexibility
of communities within the group.
    12Steve Sharp.  E.PA Region X Municipal  Solid  Waste  Division, telephone
conversation February 20,1990.

    13 In Washington, fly ash is considered "dangerous" waste ?  j must be disposed
of in concrete. Oregon regulations require monofilling all intine ,ior ash.


                                2.3 SUMMARY

Avoided cost of waste collection and disposal is the amount of money a community
saves by diverting waste from its disposal system.  Avoided cost is the sum of
savings that result from collecting a smaller amount of waste (variable collection
cost) and savings that result from disposing a smaller amount of waste (variable
cost of disposal).

                         3JLWASTE DIVERSION COST
Volume-based refuse rates provide an incentive for customers to find some way to
put less material into their garbage cans.  This section discusses the three ways that
customers are most likely to approach reducing waste disposed: recycling, reducing
waste through careful purchasing and reuse of products, and illegal dumping and
       Section 3 is divided into the five smaller sections described here:

       3.1  Recycfing Program Cost and Convenience. What are the steps
            involved in the recycling  process, and which steps should the
            city take responsibility for?

       3.2  Costs under different recycSng arrangements.  How much will
            the proposed program cost the city, and what form will the
            expenses take?

       3.3  Projecting Volume.  How much material is the city's recycling
            program likely to divert from its disposal stream?

       3.4  Waste Reduction. What are the costs and benefits associated
            with waste reduction programs?

       3.5  legal Dumping.  What impact will volume-based rates have on
            the risk of illegal dumping?
Although yardwaste and recycling programs are frequently operated separately, they
perform a similar waste diversion function and follow similar processes of collection,
processing and marketing.  Statements made here about recycling generally also
apply to yardwaste programs.
                                     I. 29

As used here, "recycling" is the process by which a portion of a community's waste
stream is removed from the waste stream, processed to make it more suitable as a
raw material, and delivered to a production facility, where it is substituted for virgin
raw materials in a manufacturing process. This description includes yardwaste and
leaf composting programs.
             In the course of the recycling process, the following activities take

          1.  Separation of recyclable materials from the waste stream.
          2.  Delivery of materials to a centralized location.
          3.  Transfer and hauling of materials to a processing facility
             (where necessary)
          4.  Processing of materials.
          5.  Sale of materials to a manufacturer.
          6.  Delivery of materials to the manufacturer.

The cost of recycling is summarized by the equation:
Except in the case of industrial recycling, one company or government agency rarely
performs all of the steps of the recycling process on its own.  Rather, the process
can involve the customer, the local solid waste agency, various contractors, scrap
                                      I. 30

 material dealers, and the re-user of the recycled material.
 By designing a recycling program, a city is deciding what portion of the recycling
 process will be performed by solid waste customers and what portion will be
 performed by hired recycling staff.

 Increasing a system's convenience, which is the same as transferring responsibilities
 from the customer to paid recycling employees, raises both the per-ton cost of
 running a recycling system and the participation level that the system is likely to
 attain.   For example, drop boxes in the parking lots of supermarkets will have a
 significantly lower per-ton cost than a curbside recycling collection program, but the
 curbside program will probably divert a significantly larger portion of the waste stream
 than the drop boxes will.
       As a rule of thumb, m jurisdiction should Increase the cost of its recycling
       program (which should Increase convenience and th» Diversion rate) until
       the cost of diverting one more, ton to recycling is equal to the cost avoided
       by not disposing of that ton,	-  *.. .' • ? -« : <.:-•-; .$•• &j -;
Figure 4 is reprinted
here (as Figure 7) to
provide a graphic
representation of the
level of refuse disposal
costs that can be
avoided through a
recycling program
operated at an
economically efficient
level of cost and

Rgure 7 is useful as a
guide to tht economic
decision involved in
designing a convenient
recycling program, but it
relies on a slightly
distorted view of the
decisions faced  by solid
     Financial Banaflt
    Prlvata Racydtag
              Quantity of Materials Recycled
Rgure 7 (Reprint of Fig. 4)
Q":  Quantity  of  material  diverted  under   a  mature,
economically efficient  recycling  program,  combined with
private recycling.

 waste planners. In reality, recycling program options usually are presented as
 program alternatives rather than quantity decisions.  A decision is more likely to take
 the form "Should we provide recycling containers?" than the form "Should we increase
 program costs by $37 in order to increase diversion by one ton? How about $38?"
                          Co*t/Com«niMte* el City Recycling
Figure 8 provides
a more realistic
image of recycling
program cost and
recovery.  Costs
rise steeply as
new program
features are
added, and than
the diversion rate
increases in
response to each
jump in
convenience. The
"steps" on this
graph are
rounded instead
of square because  RCJJTB 8
promotional costs,
which can be altered in much smaller increments than other program costs, create a
continuous range of program cost options.

Regardless of whether planners think of program options as they are described in
Figure 7 or as in  Figura 8, tha economic issua underlying program design decisions
is tha same: tha comparison between program coat and disposal cost  The way  this
issua wiU be presented is determined by tha organization of tha solid waste system in
your community.  In general, jncraoaing coat and convenienca wi be finantialy
worthwhie aa tang aa tha coat of dvarting a ton of waste from the cfapoaal system is
laaa than tha coat of olapoaiig of a ton of waste.  Depending on tha disposal costs
in an area, a jurisdiction may be able to afford some fairly sophisticated and
convenient racycflng programs.
                                      Quantity of Material Recycled
Tha "Recycling Coat and Convenience Chart" on paga 35 describes several recycling
program options and the coats that are associated with them.  The options listed are
not generally mutually exclusive. Most city recycling programs can be viewed as
some combination of tha options listed on tha chart

       Market Support Successful recyding programs around the country
       have recovered a huge amount of material.  Prices for secondary   -
       materials, especially paper,  have dropped as recyders compete for the
       right to sell their materials to industrial users.

       Governments can help improve markets for  secondary  materials by
       purchasing recycled products and creating incentives for businesses to
       purchase, and manufacture, high quality products made from secondary

       A procurement policy  based on a price preference for products that
       exceed certain minimum recycled content standards is  the most effective
       mechanism for encouraging manufacturers to use secondary materials.
       A price preference' of  10%,  for example, can offset established
       government subsidies for the use of virgin materials and can allow the
       development of economies  of scale in processes using secondary
       materials. Procurement standards requiring  specific brightness of paper
       can disqualify recycled paper for  discoloration that is not visible to the
       naked  eye.

       Glutted paper markets are uniquely in need  of government support.
       especially in the  higher paper grades.  Use  of recycled xerographic
       paper, the quality of which is now roughly equivalent to that of virgin
       paper, increases demand for high grade post-consumer paper and
       creates a ripple effect of demand for lower grades of secondary paper,
       as increased demand drives high grade paper prices outside the
       economical range for  lower grade products.

       To create an industry  recycled content standard, the EPA has
       recommended minimum content standards for recycled paper (see
       Appendix B). The Becvded Products Guide ($195 per year [four
       issues]; order by caing 1-800-267-0707)  lists the manufacturers and
       recycled  content of a  wide variety of products.
The issue* described above are complicated by tht uTffneuM between recycfing cost
and diversion coat and by the special rote played by recycirig under volume-based
The oWerence between recydng cost and diversion cost Where private recyding
programs are in place, some portion of the material processed through a city
sponsored recyding program wifl have been diverted not from the waste stream but
from existing private recyding efforts. This effect is particularly likely where the oty


 sponsored recycling program will have been diverted not from the waste stream but
 from existing private recycling efforts.  This effect is particularly likely where the city
 recycling program is more convenient than the private programs with which it is
 "competing" for materials.
 Figure 9 is a graphic
 display of the difference
 between recycling cost
 and diversion cost
 Material in the range Qm
 • Q1 is recycled by the
 city, but the increase in
 materials recovery that
 results from the city's
 program is the smaller
 Q* - Op*.  In this
 situation, the cost
 avoided through city
 recycling is represented
 by the area of the
 triangle QmCB and  not
 by the quadrangle
   P«r Ton Co«t
                        •« MOT
                   i     ""1"        9
                   or      o,.        o
              Quantity of Materials Recycled
Figure 9
Where a significant amount of recycled material is diverted from existing private
recycling, the cost of diverting one ton of waste from the disposal stream through
recycling is significantly greater than the cost of recycling one ton of material.  If, for
example, a city pays $45/ton for recycling service, and 25% of the recycling stream
was diverted from private recycling, the actual cost of diverting one ton of material
from the waste stream through recycling  is $60.  ($45 diverts 3/4 ton, therefore $60
diverts one ton.)

Estimating the amount of material that a city recycling program diverts from existing
private recycling programs is difficult  Often the only tools available for making this
estimate art surveys of private recyders  (who may or may not be in the mood to
cooperate  with their subsidized competitor) and careful  thinking about which portions
of the city's program compete directly with private recycling.  An estimate of the
portion of recycled material that is diverted from private recycling is likely to rely
heavily on  guesswork and a good feel for the local scene.'*
    12Woody Rains, of Solid Waste Services Division of the City of Austin, Texas, reports
that the City's promotional  efforts may actually have helped private recyders' recovery
                                       I. 34

                            Recycfng Cost and
      This chart lists recycling program design options, types of costs that are likely to be
      associated with each option, and the effect of each option on customer convenience.
Design Option:

No recycling
City or Customer Must

No cost
                             Effect on Customer Convenience/Like^

                             To recycle, customers must process
                             materials and deliver  them to the re-us
Private Dropoff/
Buyback Centers

Collected at
Landfills and
Transfer  Stations

Diversion Credit  to
Private Recyders
No cost to city
Processing costs, less net
revenue from material sales
Amount of credit; possibly
also price supports
                             Customers must sort and deliver their
                             own recydables

                             Convenient recyding for people who hi
                             their own waste
                             Mora dropoff/buyback centers; higher
                             buyback prices
Diversion Credit for
collection of recydables
at apartment buildings

Curbside Collection of
sorted recyding
Curbsic* Collection of
Provide Recyding
Amount of credit; possibly
also pries supports
Collection and processing
costs, less net revenue
from material sales
Collection, sorting and

reduced net revenue from
materiel sates

Cost of purchase and
delivery of containers
                             Recyding collection for some apartm<
                             Customer must
                             1) Source separate
                             2) Sort
                             3) Provide Containers

                             Customer must
                             1) Source Separate
                             2) Provide containers
                             Customer does not need to provide
                             containers; containers are a visual
                             reminder to recycle
                                            I. 35

Provide Recycling          Cost of purchase and         Customer does not need to provide
Containers             ,   delivery of containers          containers; containers are a visual
                                                       reminder to recycle

Monthly Collection          City benefits from             Customer must:
                          "economies of density";        1) Store recydables for up to one mor
                          lower labor and equipment    2) Remember the collection day

Weekly Collection          Higher per-ton                Convenient especially if same day as
                          collection/processing costs    refuse. Easy to remember day; reduce
                                                       need to store materials.

Dump and Pick            Collection costs               Completely convenient-no  behavior
Recycling  of mixed         unchanged; increase in        change necessary; No  waste reductioi
waste                     processing costs; low         incentive
                          value of materials
                                           I. 36

Still, in order to get an accurate picture of the economic value of a city recycling
program, it is important to have some idea of what portion of materials recycled
through a city program is actually diverted from the disposal stream.

The special role played by recycling under volume-based  refuse rates. When a
community adopts a volume-based rate for refuse collection, recycling programs,
which were already an alternative to disposal, take on the additional role of an
alternative to illegal dumping.  As a result communities using a volume-based rate
system  may wish to implement and advertise a more convenient (and costiy)
recycling program than is practical from a purely economic standpoint

Volume-based rates provide an  incentive to reduce the  amount of waste disposed
they put in their garbage, cans.  Customers can cut back  on their use of the  refuse
system in several ways:

      1. They can recycle (including participation in a city yard waste program)
      2. They can practice careful purchasing and re-use of products (including
            home composting of yard waste)
      3. They can illegally dump or bum some portion of their waste

Rgure 10 provides an illustration of the extra costs incurred to make  a recycling
program extremely convenient  Under this scenario, the avoided cost benefit of
recycling is the area of
region A minus the area
of region B.  As long as
this value is  positive,
recycling will still be cost
                            P»r IbnCoct
                             Financial Bwwflt of Program )• R»due«d
                                    from *A* »o 'A'-
A very convenient and
appealing recycling
program may result in
the recycling of some
waste that ideally would
never have teen
generated in the first
place • very convenient
recycling can be a Dis-
incentive to wast*
reduction.  But a
convenient program can
also counteract some of
the incentive to illegal dumping that is created by volume-based rates.
                              Financial Benefit
                              Private Recycling
                                       Quantity of Materials Recycled
                          Rgure 10
                                      I. 37

                 3.2 Cffgte Under Ptftefant Recydino. Arrangements

This section discusses costs of recycling programs as they are actually presented to
a solid waste agency.

To decide whether a move to a recycling program will be cost effective, it is
necessary to estimate a per-ton cost of recycling to compare with the avoidable cost
of refuse  collection and disposal.  Since the purpose of estimating this recycling cost
figure is to compare it with avoidable costs, recycling costs should include all new
costs that the city will incur as a result of operating  a recycling system.13

Although  the physical requirements of a given type of recycling program are fairly
universal, contract municipal,  and private systems each present cities with a different
cost situation.  Therefore each service delivery system is considered separately in this
section.  Franchise recycling collection is discussed  alongside refuse franchise
collection costs in the Part 2 of this chapter.

Some programs may rely on different service  delivery systems for different portions of
the recycling process.   Although precise cost data  is often difficult to come by, the
cost of diverting one ton of waste through recycling can be estimated by adding the
costs of each component of the recycling process.

A complication of variable cost calculations for recycling programs is the effect of
large quantities of recycled materials on the local secondary materials market.
Materials from a city sponsored recycling program can overwhelm local dealers and
lead to a  drop in the price of a  secondary material.   When the price of a material is
low, private and non-profit recyders tend to cut back their collection  efforts for that
material.   As a result, city collection of a material tends to  increase as the price of the
material declines.14

A decline in secondary materials prices would cut into net revenue from the sale of
secondary materials.  A drop  in net materials  revenue could offset some of the
economies of scale benefit of increased recycling volume.
      1'Fixed costs of recycling are considered (on a per ton basis), but fixed costs of
refuse service are not  Refuse  service is a public health requirement and fixed costs
are not optional.  Fixed costs of recycling, on the other hand, are optional, and vary
according to the convenience of the recycling system.

    "Comprehensive Curbside  Recycling: Collection Costs and How to Control Them.
Glass Packaging Institute, Washington, O.C., 1988,  p.5.

                                       I. 38

 Municipal Recvdino
Costs of providing municipal services are often underestimated because use of city
equipment facilities and worker time are frequently covered by revenues from the
general fund.  In order to accurately measure a city's cost of providing a service, it is
essential that all associated strain on city resources be evaluated and considered.15
For information on worksheet systems that can provide a step-by-step guide to
accurate municipal accounting, please refer to Appendix A: "Guides, Worksheets and
Computer Aids to Solid Waste Decision Making."

Recycling cost is the sum of collection cost, processing cost, and marketing cost (or
revenue). That is:
                                                           v  -  ',«•> X .
The remainder of this section discusses each of the costs mentioned in the box
above in greater detai.

Costs of municipal services have a tendency to vary upward to the highest service
demand level and then stay there.  White it is prudent to be prepared for high levels
of program participation, large increases in equipment investment and full time
    1SES. Savas, "How Much Do Government Services Really Cost?", in Urban Affairs
Quarterly, Vol. 15 No. 1, September, 1979, pp.23-42.
                                      I. 38

 employees could result in high and inflexible recycling expenses.

 Ideally, refuse collection staff and equipment could be transferred to recycling opera-
 tions at the exact rate that customers divert waste from disposal to recycling. In
 reality, it may be necessary to hire temporary staff and  arrange for loaned equipment
 to accommodate recycling peaks and valleys that can occur during the introduction of
 recycling incentives.
 Program Administration Costs.
 Administration costs are the costs incurred for supervisors, planners, administrative
 workers, customer service representatives and inspectors whose work is necessary
 for a recycling program.  These costs include wages and salaries, benefits, and office
 space and equipment  Costs should be allocated to the recycling program on the
 basis of time devoted to recycling activities.
ITocycing cotoction cost.
Collection costs include pay and benefits for workers, cost of purchasing recycling
trucks, and maintenance and operation costs for trucks. These costs will vary from
jurisdiction to jurisdiction both in amount and variability  because of differences in
cities' hiring flexibility.

Overtime labor costs  (which must be evaluated at an increased rate) vary in the short
run. Other labor costs are variable to the extent that city policy allows laying off or
moving workers whose heip is no longer required.

Truck purchase costs are fixed.  Per-ton cost of trucks  can be calculated by dividing
the purchase price of the trucks by the trucks' projected lift On tons). Operations
and maintenance costs generally vary with tonnage above a minimum fixed level that
includes fuel costs and hiring a mechanic.

Worksheets inducted  in Evaluating Residential Refuse Collection Costa: A Workbook
for Local Government (Public Technology Incorporated, 1978) are an excellent
resource for evaluating collection costs for both recycling and refuse.
Transfer and Hsufng Cost.
Wnere collection vehicles do not deliver recydables directly to the processing faoirry.
transfer and hauling costs must be considered as part of the cost of recycling.  Costs
involved in this part of the recycling process include the cost of a transfer site (wr>ere
a site is not already available at no extra  cost or inconvenience to other city

                                      I. 40

 departments); purchase, operations and maintenance of transfer equipment and
 longhaul trucks; and labor.

 The approach to the cost of land and building for a transfer site depends on the time
frame being examined.  Over a five to ten year period, the cost of leasing a site
should approximate the net cost of purchasing a site at the  beginning of a pehod
 and then selling it  at the end.  These costs will depend on interest rates  and land
 costs in each jurisdiction. Over a period of 20 years or longer, dividing the cost of
 the facility by the number of years being examined provides a good  per-year cost

 Per-year site costs can be divided by the number of tons projected per year to deter-
 mine per-ton site costs.

 Labor costs of transfer and hauling are variable in the long run to the extern that city
 policy allows laying off workers whose help is no longer required, or, alternatively, to
the extent that  good fortune allows  workers to be transferred to other areas within  the

Per-ton equipment cost can be calculated by dividing  the purchase price of the
equipment by the  equipment's projected life On tons).   Operations  and maintenance
costs generally art variable above a minimum level that includes fuel costs and hiring
a mechanic.
Recycling processing costs include site costs, purchase price of processing
equipment, operations and maintenance costs for equipment, and labor.

Where land is not avaflabto at no cost or inconvenience to the city, site costs (land
and building costs) can be approached as a per-year leasing cost  (determined
through interest rates), or purchase costs can be divided by number of years under
consideration to determine the per-year cost  Per-year fixed costs can be divided by
tons processed par year to determine a par-ton cost

Par-ton equipment coat can be calculated by dividing the purchase price of the
equipment by the equipment's projected life On tons).  Operations and maintenance
costs generally are variable above a minimum leva! that includes fuai costs and hiring
a mechanic.

Where the city contracts for recycling processing service, short run variable costs
indude the average par-ton processing fee, while long term variable costs include
administrative  costs and projected market impacts of increased  recycling.


Net revenue from the safe of secondary materials.
As of 1989, markets for recycled aluminum and glass cutlet are fairly stable, but
mixed paper and waste paper prices have been unstable and low.  Markets for
recycled plastics are still in the development stages,  tt is likely that paper prices will
eventually rise and stabilize, but cost of recycling calculations should be based on
prices that are currently available.

The cost of transporting recycled materials to their users will vary widely from
jurisdiction to jurisdiction.  Subtracting transportation costs from the price paid by the
user for secondary materials yields a convenient net revenue figure that describes the
financial benefit  a community actually receives in exchange for  its recydabtes.
Contracted Recycling

Costs to a city of recycling performed by a contractor depend entirely on the terms of
the city's contract  In general, short and long term variable costs are the same,
although large changes in volume could result in a change in bid or proposal for
future recycling contracts, or in some cases could trigger price changes according to
the details of the recycling contract

A contract that allows a city to pay for recycling service on a per-ton basis is
appealing because it trantftrt to tht contractor tht risk of taking on a higher level of
fixed costs than actual votume can justify. On tht other hand, a contractor's bid is
sure to reflect the level of ritk that a per-ton payment system carries with it A
regional approach to rtcycing can sometimes allow individual communities individual
flexibility at lower rate*.

The question underlying a decision as to whether to contract for recycling service  is:
Which  it greater, tht profit and risk taking premium we must pay tht contractor, or
tht financial advantage tht contractor has in lower paid employees, a workforce
whose size it mort flexible, and (where  applicable) mort experience in the recycling
                                       I. 42

Types of racyding contract* which ar» widaty available indue*:

Par-ton fee.   The aty pays tha contiaOui an  agreed fee tor every ton
racydad  In We case, the cays racyding costs are perfectly variable andean
ba compared dksctty wftt par-ton avoided disposal costs,

Par-ton fee with price supports. Ihadty pays the contractor a par-ton fee for
avary ton recyded,^ and agrees to  reimburse the contactor .» secondary
fBSQurces frit below  ajn agreed floor level. In Wa case, recycfing costs are
variable, but can increase at high recovery levels because of flooding of local
     Return on tad Betels. The ctty guarantees the conuauut an agreed rate of
     return  on the appraised value  of the contractor's fixed assets.  When tha
     contractor's income from the sale of secondary matenaJa fafls to generate the
     agreed return* the dty pays the contractor the amount of the shortfall

     in Ws  case; variable recycing costs indude costs  at collection  tabor,
     ^^4M^4^^^^fc^Stf^4fe &MAl^4MP  j^MM^' JfetffeiAf^M^M^^^ft ^fc4^w ^^h^Hh^^M^fr -ri^^fe^^^^^^^fc^Ktfte.* • fMk ^^MhJB^fc^^B1 ^^Mk^i •^tfM^^^k^h^B-
    • * si«g-jBfegam at» ^•BJKV^  ^RX ^•^^r^BjCATBi ^BM •^v.a^nfnB^BTv •^PBC^^^B^BI«S*V TB^ ^^rjB^aa^3 ^BBB^X " nrJi^BB'MBr
    . Bl^* "^^*"^^^" •••)•, vHHv^^l^ ft.. W-^W* WV^MTCv^iW ^OT ^WniVBi^W^^n ^«. V i^P^^^^VP^^W V •e^F ^MVW^P^Pw. ^PH ^*^- •*» ^^^^^r^^**

     recydabiee, teas the addWonal revenue aveiafaie to the conU'actor from the
                                ?'•*•%;• •• £•;.:...,;...;,A -;:-.••.;;.?&....   <,.  -. -
     Ptoceeaing and ineriteBlng curttacts%  City employees collect recydabfes, then
     defver them tp a) corrtractOf for processing and markatlng. Pos stole contract
     BrrangpKDentB yidMdJB-ii per* ion payment (to> the cft^f or to the oonu actor) for
     eacri Qflpe of i|BBB|riiBr:|>ROcesBedj risk end revenue sharing front the sale of
                                   agreement by in* contracts te accept,  the
                                              w« vary w«h quantityprocessed
                                    market uOtuMons* • -,
Franchtsed waste haulers can be required to provide recycling service to their
customers, as is the case under Oregon's "Right to Recycle" law.  To be affective,
such laws must ba very specific about what features of recyding service are required.
Private Recvdina

Private recyding costs the municipality nothing, and as a result is always the


 cost effective waste diversion strategy. Two drawbacks to complete reliance on
 private recycling systems, which generally consist of drop off and buy back centers, is
 that they win divert only limited amounts of waste and that they may not be
 convenient enough to discourage illegal dumping or burning of waste.

 Encouraging private recycling through advertising and other publicity can be an
 effective use of solid waste funds.  Some communities may wish to go the next step
 and provide a "diversion credit" to reward private recyclers for keeping material out of
 the waste stream.

 A diversion credit is a par-ton cash payment by a city to a private recyder for each
 ton that recyder diverts from disposal. Such credits allow cities to use avoided cost
 benefits directly to support recycling programs.  Such credits may be appropriate in
 jurisdictions where private recycling is an established industry that could expand
 seriously with additional financial incentives.

 Where diversion credits or other subsidies are used, the cost to the municipality of
 recyding one ton of material is equal to the per-ton diversion credit or price support

 Some communities require that private refuse collectors collect recydables as a
 condition of obtaining a hauling license.16
    1dTne Town of Lewisboro, New York, has such a licensing requirement  Lee Blum,
Lewisboro Recyding Coordinator, correspondence of January 8, 1990.
                                      I. 44

                            3^3 PROJECTING VOLUME

This section discusses methods by which reasonable recycling goals can be set  If a
goal is realistic, it can provide a useful planning tool, as well as a standard by which
community recycling levels can be measured. A well-publicized march toward a
tough but realistic recycling goal can be very helpful to public relations staff trying to
motivate community members to increase their recycling levels.

Determining what level of recycling a community is capable of achieving  is a very
difficult process, especially when price incentives to reduce disposal are  involved  for
the first time.  Good general advice  is to plan carefully, use all available information to
make the best projection possible, and be prepared to be wrong, as forecasts are
never completely right

While some jurisdictions will choose to create a projection through regression
analysis, the lack of local experience with disposal  rate effects can create problems in
calculating the necessary rate elasticities of waste generation.  Forecasting is
discussed in Part III: Conducting a Rate Analysis.

The steps below outline a process through which a jurisdiction can decide what level
of recycling it  can reasonably hope to attain.  Planners may wish to create parallel
analyses based on "optimistic* and "pessimistic" recycling projections, just as planners
in other areas prepare for both good and  bad results in areas beyond their control.
Waste composition analysis can help to determine how much of the waste stream is
composed of materials that your recycling program will collect  This value is the
absolute maximum diversion rate your program could attain.

For example, if a city program collects  glass, cans and newspaper, and if glass
constitutes 10% of the waste stream, cans constitute 15%, and newspapers constitute
20%, 45% recycling is the most the program could possibly divert A more
reasonable estimate would be in the range of 20%.

Likely recovery rate for each material

The Recydng Recovery Rates Chart on page 46 contains very tentative information
on waste composition and recovery rates for each material in several jurisdictions
which operate successful recycling programs. Do not rely on these numbers for
precise recovery estimates. By researching information on other communities whose
programs are similar to yours, it is possible to get an idea of a range of likely
recycling levels.

                                      I. 45

                                    RESIDENTIAL  RECYCLING RECOVERY  RATES CHART
•Hi IK
dKMTCo/m.         COUECFED FM
% OF Awiuou
Seattle. MA
Pop. 490.000

Palo Alto. CA
Pop. 57.000

AM Arbor. Nl
Pop 110.000

Variable CM rate:
Itt CM 113. » •».
addl. CM fl.ll
yard westo $2.00
po* ^v»

Varlablo CM r«t«
1 CM $».2S BO.
2 CM* $12. 19 •>.

FlnMCod From
(2. 73 •!! It

(l-4plOK Ollglblt)
MMkly curbslde
colloctlon; three
NoNtkly curbtlde
collectlm; 1
cMteleer provided

Meekly collection;
SMI day as garbage;
City provides burlap
recycling bags.

Monthly collection;
no containers
provided; customers
•ust sort Mterlals

251.000 Ions

100.000 Tons

30.000 Tons
(single f telly






glass. aluBlmai.
bl-evtal cans.
sea II scrap

yardwaste. old
P.E.I, plastic.
high grade paper

tin cms,

used ol 1 .
car batteries.
office paper

14% (35. 130 tons)
22% (S4.703 tons)

10% (26.096 tons)

l.S% (3764 tons)

5.3% (13.299
glass 8%
(8.000 tons)
all Mtal 4%
(4.000 tons)

paper 48%
(49.000 tons)
yardwaste 21%
(21.000 tons)
plastic 6%
(6.000 tons)

23.5% (6.050
.51% (153 tons)*
6% (1,000 tons)

l/% (5.000 tons)
(14.591 tons)
(13.894 IMS)
(0.453 tons)
(401 tons)
(1.181 tons)
(51.942 tons)
glass 19.5%
(1.560 tons)
4.6% of all ;
(705 tons) ,
paper 12.1%
(S.045 tons)
yardwaste 32%
(6.820 tons)
plastic 1%
(6 tons of

40% (4.000
13.3% of all
-. _ _ _ t VIA
cans (joo
9.7% (550

    €9»'S)  I6Z
  (suoj £9/) %»
(suoj wt'i) %/
    6S6'Z)  %9I
                                                                   /t»i3 :*6i
                                                                    St Xtp

                                                                                                            *l««1 'IS
        JO t
wnnis iisvn Jo %
                               WJ OU3H103
                                                                  wi nun
911 Till
                                                              3JSVH WI01

                                     (airuiixiioa)  XUVHO sixvu  VIAOOIV

     Three (actors limit the  usefulness  of  recycfing information from other
      Most of the junaJctions fated do not charge far refuse ooftection on the
      bast* of volume, and therefore their recovery rates are not a perfect predictor
      for recovery under a volume based garbage rate system,

      Some of the programs fated are fatly new, and have not finished "ramping
      up" to their long run recycfng levels*

      The waste composition data presented is fairly "sofT. and represents best
      guesses in some cases*

     Stl, recovery rates from other jurisdiction can help geneitt an estimate of
     whet fevefs of recycSng are attainable through your program.
Yard waste

Where yard waste makes up a significant portion of the waste stream, a yard waste
composting program can be a very effective waste diversion strategy.  Seattle's yard
waste program, for example, diverts more waste from landfilling than any other single

The recycling recovery rates chart on page 46 contains information on yard waste.
Tons diverted from other recvding

One factor that complicates the task of projecting volumes that the programs may
expect is the problem of estimating the diversion from existing private recycling
efforts.  Depending on the level of private recycling, the convenience of the new city-
sponsored programs, and the targetted materials, the jurisdiction may end up with
more tons than a waste composition study may indicate are possible. This is
because a convenient program that hits the same materials as existing efforts may
cause customers to give those tons to the city-sponsored program.  This will increase
the costs of the city-sponsored program.  The jurisdiction wil need to estimate the
number of tons that the programs will divert, and include them in the cost estimates.

For example, the convenient curbside recycling program that Seattle instituted, it
estimated  that  about 25% of the tonnage collected would be tons that would be "new"
to the City's system - tons that previously went to a private facility or were re-used.
Further study has indicated that this estimate may be tow.

                            3.4 WASTE REDUCTION

 Because reducing waste avoids all economic and environmental costs associated with
 solid waste management waste reduction is by far the most economically and
 environmentally sound method of dealing with municipal  solid waste. Volume-based
 refuse disposal rates provide an equal incentive to recycling and waste reduction, but
 a highly visible recycling program  tends to obscure the savings opportunities that are
 available to customers who reduce their generation of waste.

A waste reduction promotion program can help customers develop waste reduction
 habits that they will incorporate into their daily behavior.   Habitual waste  generation
 habits are the cause of solid waste problems. A change in those habits can help
 make those problems more manageable.

Waste reduction can also be thought of as "materials conservation." Promotion of
waste reduction may, therefore, be closer in theme to energy or water conservation
 promotion than to other solid waste management programs.

Waste reduction education programs  use traditional public relations strategies to
 make customers aware of the importance of waste reduction and methods that they
can use to reduce their output of waste.Convincing someone to use a particular
waste reduction strategy has two benefits: it reduces the waste stream directly, and it
provides a "waste reduction experience" to the customer, who can then use that
experience as a model  for other waste related decisions in the future.

The savings that result from waste reduction under such a scenario are real:  they are
the difference between how much waste actually was handled and  how much would
have been handled were it not for the program.  Investing in a waste reduction
program is something of an act of faith, since it is very difficult to measure the
success of such a program. Some customers may reduce their waste output as a
result of the program, but overall disposal may increase (or  decrease) as a result of
increases in income, population, household size, and financial incentives.  Surveys
can provide an idea of the success of a waste reduction program, but are not always
                   4,:.;*;f:V:JS^':;^:.i: . . '              - -
                                            viewed* 49 two dwSfsnt groups of

                  ptopte on UM to raduc* their

 Tactics people can use to reduce their waste output

 Selective Shopping
 '^•^^•A^h^hM^M^^MOTM^H^M^M^Ba^^                                                  »•

 Packaging makes up 1/3 of the average household's garbage.  By buying products
 which are not heavily packaged, avoiding double and triple wrapping of purchases,
 and re-using shopping bags and other packaging materials, it is possible to reduce
 household garbage by up to 20%.17

 Buying recyclable and recycled products can help reduce waste disposal costs and
 increase markets for recycled materials.

 Buying durable products can save money and can reduce waste generation.
 Buying in bulk reduces the amount of packaging waste per unit of product

 By avoiding impulse buying, customers can save money on unnecessary purchases
 and reduce unnecessary disposal.

 Reusing Household items

 Old kitchenware, appliances, dotting, furniture, toys and books can be donated to a
 charitable organization or resold through a newspaper advertisement or at a garage
 sale, rummage sale or consignment shop.

 Likewise, buying used goods can be regarded as a waste reduction activity.

 Household Waste Reduction Strategies

 Reusing packaging and other items, particularly in the kitchen, can help reduce
 household refuse generation.

 Re-use of budding materials can help  cut household costs and reduce output of

 By renting or borrowing items that are used infrequently, homeowners can avoid
 unnecessary purchases and help to identify which items are really needed.

 Proper repairs and maintenance of houaehoid items can delay replacement cjsts and
reduce disposal.
    ""Cutting  Down on  Garbage" factsheet produced by  the  Washington
Extension Service for the  Seattle Engineering Department's Solid Waste Utiity


 Home Composting

 Home composting of yard and garden waste relieves the city of costs associated with
 both disposal and curbside composting programs.

 While recycling is an activity that is easy to visualize, waste reduction is a concept
 that is somewhat more elusive.  By providing examples of activities that constitute
 waste  reduction, a promotion program can help people to understand the benefits of
 reducing waste generation and to consider the environmental consequences of daily

 Tactics the sold waste agency can use to promote waste reducing activities:

 o     Charge for refuse service on the basis of volume.

 o     Provide waste reduction information on occasional bill inserts.

 o     Run an In store* packaging reduction information program.

 o     Prepare and distribute a "home waste audit manual." lists of local repair
       services, and lists of second hand  and consignment shops.

 o     Print "Snooper's Recycling Kit" instructions on grocery bags to   encourage
       customers to keep grocery bags in their cars and   reuse them  on their next
       visit to the store.

 o     For businesses,  offer waste audit services and prepare waste    reduction
       promotional materials, such as a poster describing efficient use of a xerox
Waste reduction is not a grand strategy, but rather a collection of small changes that
people can make to reduce their waste output  If a waste reduction program can
instill several specific waste reducing habits, it is possible that customers will apply
the lessons they (earned to other aspects of their waste generating behavior.

While progress in waste reduction is very difficult to measure, the cost of a
promotional program is likely to be low, and benefits of changed disposal habns are
likely to be large and long lasting.  Reducing waste disposed is a way of preventing a
waste problem from developing in the first place, rather than correcting an


 Traditionally, the fundamental mission of a solid waste agency has been the important
 but straightforward task of maintaining public health by keeping its jurisdiction free of
 garbage.  Illegal garbage dumping (used here to include illegal burning) represents a
 failure to accomplish that mission.

 The environmental crisis  and tight budgets of the late twentieth century have forced
 many solid waste agencies to consider other issues along with public  health.  The
 new solid waste mission  can include keeping the jurisdiction free of garbage,
 disposing of garbage in  a way that will limit  damage to the environment and
 providing the services described above at a cost that customers can afford.

 Under this revised mission, a small increase in the risk of illegal dumping-intolerable
 under the old conception of solid waste responsibilities-may be acceptable, if the
 "cost" of slightly increased dumping risk is outweighed by the benefits of reduced
 environmental impact and lower system costs.1*

 Just as changing environmental realities have altered the situation faced by solid
 waste managers, so have new waste management strategies required a change in the
 attitudes and responsibilities of solid waste customers.  Solid waste customers all over
 the country  are separating materials from their refuse for recycling, and in the process
 are gaining  a new sense of the connection between their own daily activities and the
 well-being of the environment

 This increased sense of responsibility can be a powerful tool in the effort to control
 illegal dumping.  Societal disapproval has helped reduce instances of  drunk driving,
 and a similar attitude can help prevent illegal dumping.

 While many areas may have trouble with illegal dumping in response to sharp
 increases in refuse rates, Seattle does not appear to nave experienced a significant
 problem with illegal dumping or burning of waste.  Other large cities may have
 problems.19   However, it  is difficult to get a very accurate or quantitative handle on
    '"Wayne OeFeo, Deputy Director of the State of New Jersey Board of Public Utilities,
reports, "New Jersey has experienced a surge in illegal dumping under a flat rate system.
However, this system, in combination with exceptionally high dumping costs,  has put
people in the untenable position of having no method of reducing their costs.  Therefore,
the flat fee) system provides an incentive for illegal dumping.' Correspondence, January
16, 1990.

    19 There are several factors that may contribute to Seattle's  relatively small  problem
in this area:  1) there are few vacant lots in the City,   2) the Northwest has a strong
environmental ethic,  3) the area has many private recyders, and other legitimate  ways
to reduce the amount of waste that needs to be disposed, and  4) volume-based  rates
are not  new to the area, so customers have  had time to modify their behavior.

                                      I. 52

the problem.  Also complicating the problem is the fact that the waste can easily be
dumped across jurisdictions) lines, and burning can be difficult to detect or trace to
its source.
     The tactic* fated beta* can help reduce the probability of legal dumping by
     creating a feefing  of partnership between customer and th» soSd waste
     agency and by making fflegai dumping a high-risk, low-reward proposition:

         o  Publicize the reasons for th* rate structure.
        o   Pass* f.****^ and eidbroe en antf-dumpinQ ordnance,
        o   B« careM of very steep rate structures and huge waste reduction
            Create a fairiy convenient mecharasm for iegafy cfspoencj of Extras."
            Mandate a minimum service level
Pubfciza the reasons for the rate structure. A generally sympathetic public will be
less inclined to dump, and will be more diligent in preventing other citizens from

Pass, pubtoze and enforce and antidumping ordinance.  Where illegal dumping is a
crime, officials and citizens will have more options for dealing with illegal dumping
violators directly.

Be careful of very steep rate structures and riuge waste reofcafon ircenth/es. The
more crime pays, the more criminals you will have on your hands.  While very steep
rate structures have helped inspire electricity customers to conserve power, they may
not be appropriate for solid waste services.  Conservation of electric power is always
a "good" from the perspective of the electric utility, but conservation of refuse services
can be a "good," as in the case of waste reduction or (to a lesser degree) recycling;
or it can be a "bad," as in the case of illegal dumping or  burning.
Create a fatty convenient mechanism for tegafy deposing of •extras.- Honest
customers wtt occasionally generate more refuse than their subscription level allows
them to dispose.  A system for paying for disposal of extras wi allow these
customert to ive in a dean and sanitary home without turning to a We of crime.

Mandate a rmrwnum  service level Where participation in the system is required,
customers wi have an Irwentive to reduce use of disposal services to a reasonable
minimum levei  Reduction below that level may not be in the best interest of the

Phase in service level enlorcernent  In the eany stages of a new rate structure,
enforcement personnel can probably accomplish more through education than
through punishment


                        (Comparison of Sections 2 and 3)

 One effect of adopting a volume-based rate structure for refuse collection is likely to
 be an increase in the volume of material  that is recycled rather than thrown away.
 Information presented earlier in Part I should help determine whether such a shift to
 recycling will benefit your community financially.
      Several pott* are worth keeping in mind while comparing avoided cost
      el daposaf {section 2) to waste diversion cost (Section 3):
                                                               Most of the
      analysis presented above deals wth per ton costs.  WWe this is certairty
      not the orty way to compare coats property. It fs an example of a method
      for comparing coata and benefits, faffiy.   .   '  .......'...': ""   '  .  ;•

      Other possJbie apcfoachea fciclude total costs par year or projected costs
      and benefits over Ihe me of the programs.

      Short run and long run costs can be very dMerent  A 20 year approach
      works we* for long range planning,, but may not predict the losses that a
      program may fcicur early in its life.
      Volume baaed rates am not part of recycing  system design*   The
      coat/convenience graphs in chapter 3 refer to the  physical characteristics
      of a fecycing program, not to financial incentives tar customers to use it

      increasing program participation by making programs more convenient wi
      ncrease marginaf recycing coat or the cost of inspiiing people to recycle
      one more tan o(^ material: increasing partiopation  through rate incentives
      spreads feed ccefE over a larger number of tone and does not affect the
      marginal coat of increasing participation through convenience.
If avoided coat is greater than recycling cost then recycling rate incentives will
probably benefit your comrnunity.

If recycling coat is greater than avoided cost than volume-based rates could end up
costing your comrnunity money.  If your community faces this situation, the following
suggestions may be worth considering:

Analyze the potential impact of an increase in the recycing rate. Spreading fixed
recycling cost over a larger number of tons could bring per-ton  recycling cost below

 per-ton avoided cost

 Reduce lecycing costs.  Your city's recycling program may be more convenient for
 customers than is practical.  A slightly less convenient system could bring the cost of
 recycling betow avoided cost

 Use very mfld rate incentives. Even if current disposal costs  do  not justify large scale
 recycling efforts, disposal costs  are likely to rise.  Implementing a volume-based rate
 now could prepare customers for system  changes that could be required in the

A move to variable rates may be considered without being justified on purely financial
 criteria. The rates provide greater equity to customers because  small waste
 disposers wiH not be subsidizing the biH of customers disposing  of large volumes of
waste. Implementing a system can be fairly  low cost if a simple system is  used (for
example, see discussion of bag/tag rate designs in Part II).  Seattle implemented its
variable can system well before  it experienced any landfill crises, largely because of
the activities of the recycling community, and found that the rates helped slow the
growth in  tonnage and induced  a significant  share of private  recycling.
Volume-based rates may not be right for every community.  But a thorough
examination of system design and costs can help planners make the best solid waste
decisions for their communities.


 Effective public relations amounts to keeping the public informed as to the solid waste
 situation the community faces and listening to the community's feelings about what
 solid waste strategies the city should pursue.
     A successful pubfic rotations effort wil have two major benefits:

        o  A system chviye Is more BceJy to be .approved.

        o  Wei infamed customere 

To gain support for a volume-based rate for refuse-, it will be helpful to communicate
the idea that volume-based refuse rates can solve problems that people with political
power see as pressing.  Because there is a large number of effects associated with
volume-based rates, it should be possible to present one or more effects as the
solution to  a problem  considered especially important by a particular person or
interest group.

Problems that a volume-based rate can help solve include:

Difficulty in siting a new landfl or incinerator.  Where citizens are satisfied that all
available recycling and waste reduction strategies have been tried, there should be
less opposition  to siting new disposal facilities.

Unfair dstribution of sold waste system costs. A payment by volume system relieves
customers  who dispose of a small volume of waste of the burden of subsidizing the
waste service of customers who generate a larger volume of waste.

Under-utibation of an existing recycing system. Recycling numbers can increase
significantly when proper price incentives are applied.

Ugh coat of government services.  Waste reduction and recycling associated with a
volume-based rate  system may not completely offset the effect of rising disposal
costs, but it can help to mitigate that effect

Continuing damage to the environment  A volume-based rate system can help  make
people aware of the costs associated with activities which damage the environment,
and can help inspire people to tnink about the environmental impacts of their routine

Shortage of financial resources for local government Where refuse service is
currently financed out of general fund revenues, a shift to rate-financed service can
free up money for other uses.
                                      I. 57

There are several factors unrelated to instinctive resistance to change which could
lead decision makers to oppose a move to a volume-based rate system. Several
frequent objections to variable rate systems are listed below, along with suggestions
for responding to those objections.

Increased general  and administration costs.  A volume-based rate can require an
increase in planning, customer service,  inspection and administrative costs.  Costs are
likely to be particularly  high during the implementation phases of a new program.
      One possible response.  Waste reduction and recycling incentives may provide
enough avoided cost savings over time to cover start up costs and continuing higher
increased general  and  administrative costs.  Disposal costs may continue to grow
regardless of the organization of the solid waste system.

Increased risk of legal dumping. Customers seeking to save money on their refuse
bills may resort to  disposing of their waste illegally, creating public health risk and
offensive sights and odors.
      One poestoie response.  The risk of illegal dumping can be 'mitigated through
public relations  and education, restraint in the "steepness* of the rate structure,
mandatory minimum  service levels, enactment of an anti-dumping ordinance,  and well
publicized enforcement  (For more information on illegal dumping, see section 3.5).

Rtok of  unstable revenues.  Except where rates are designed according to strict cost
of service criteria, accurate revenue projections wiU depend on accurate service  level
projections, which  are difficult to perform.
      One possfcte response.  The revenue risk associated with the early  stages of a
variable rate system can be viewed as one cost of implementing a worthwhile
program.  In the long run, a volume-based rate system could enhance the stability of
system  costs and  revenues by allowing customers the flexibility to adjust their
disposal behavior in response to changing per-unit system costs.
Tax • ici uuee.  Where refuse service was previously financed out of general fund
revenues, customers' tax burdens may not fail by an amount equal to their new out-
of-pocket refuse service costs.
      On* poestte reeponee.  Customers wiO have the opportunity to reduce their
bills through more responsible solid waste behavior, where previously the level of
taxes dedfcated to refuse service appeared completely beyond their control.  Also,
new tax levels can be compared to "what they would have been" had they still
included  refuse service costs.

                    &3_SIRATEGIES FOR BUILDING SUPPnnpr

Widespread support of a volume-based refuse billing system can make discussion,
adoption and implementation of a volume-based rate system a much smoother and
more successful process. Valuable supporters include customers, local political
leaders, and community groups.

Support of customers (also known as "ratepayers" or "constituents") is important
because it is customers' disposal habits that a volume-based rate is designed to
change. Negative customer attitude can only make waste management projects more

In most jurisdictions, political leaders must approve changes to the waste system.
During the implementation  period, when both costs and customer frustration can be
high, continuing support from political leaders  can be very helpful to morale and can
be necessary to continuation of the new programs.

Other public utilities, including electric,  water and gas utilities, typically charge
customers on the basis of the amount of service they use.  Decision makers in local
governments which  provide one or more of these services directly will have
experience with rate systems, and therefore may not feel as uncomfortable with the
idea of charging rates for "public" service as would officiate from a city without such

City officials without direct  public utility experience may be reassured by  examples of
successful utility pricing in  their own communities as weU as successful refuse rate
systems in other areas.

Community groups  can be a powerful  force shaping both customer attitudes and the
official positions taken by political leaders.  These groups should be sought out and
involved as much as possible in the planning/decision making process.  Many local
groups take positions on a large number of issues; the support and suggestions of
such groups are far preferable to their opposition.

Pro-recyding groups and neighbors of a proposed landfill,  incinerator or transfer
station can be strong supporters of a volume-based refuse rate system.  Active
support of theee community groups can be a great help during decision and
implementation phases of a volume-based rats system. Citizen briefings (discussed in
section 5.4) can help build long term citizen and community group support

Although a voiums-based rats is a sensible idea in many situations, a major change
in the operation of any government service is likely to meet some opposition.  The
suggestions below can help generate support for a system change by involving
people in  the decision process.

 1.    Help people umJeisUmd the reasons far and importance of changes they are
      being asked to make,  A local disposal or siting crisis, or an underused
      existing recycling system, could make the value of reduction/recycling
      incentives dear.

2.    Create a sense of ownership and control  over the course of events.  People
      should already feel somewhat responsible for the current solid waste situation,
      since everyone  throws things away.  Granting a large number of people the
      opportunity to participate in decision making for a new system can give people
      that sense of ownership.

3.    Introduce ideas gradualy. People may not  be willing or able to understand
      and evaluate  all trie implications of a new refuse system at the same time.
      Information that is introduced  gradually will probably be better understood and

      Customers may resent  cancellation and re-starting of a new system.  Waiting
      until adequate demand for a material is available before including it in a
      recycling program can  help avoid customer resentment

4.    Pott out modeai of the desired change.  Information on successful solid waste
      programs of an types is widely available, both in waste industry publications
      and from local solid waste officials, who are often flattered to be asked to talk
      about their programs.

5.    Alow a practice period. Customers should  be given the opportunity to try to
      reduce waste before having to commit to an inflexible service level. Leaders
      should have the opportunity to learn about volume-based rates before being
      compelled to make a decision on them.

&    Provide or point out  iswatds for good participation.  Customers will be
      rewarded for cutting  waste  levels by paying lower rates.  Politicians and
      environmental groups wi be rewarded for deciding on a volume-based rate
      system with lower (or less increased) system costs,  a successful  recycling
      program, and more environmentally conscious citizens.

 There are four distinct phases of a public relations campaign in support of a volume-
 based rate system.  The periods of the phases are dearly bounded by landmark
 events in the rate adoption process.

          Wormalfao-Tne TrVeYe looking into this* phase,
                     I Begins with first consideration of a change;
continues until tn* sofid waste agency creates its proposal.

                           -The "We hope to go Ms way- phase.
                      I Begins with announcement of a proposed
change; continues untS the pofiticaJ decision makers approve the
             rate system*   . ••••  •  / ~;'-r".\\: '•' -•-••••  •.;;
            Pre-educafion and sign-up-Tbe This fi what's going to happen"
                         i: Begins with approval of new rates;
continues untt new rates go into effect'- •::""'.v'".-.:'":'"'-v •••••••••••••••••.

Continuing  education and pubic reteticm-Tbe Trie  ie how it is*

                          Begins when new rates go into effect;
The immediate goals and tactics used during each phase of the decision and
implementation process are different, but overall P.R. and rate goals are the same: to
make customers understand the cost of waste disposal, and to give them control
over how much cost they bring upon themselves.
Phase 1:  Preeminary rtbrmabco-The -We're looking into this- phase.

Before a concrete proposal is made, customers need to understand the nature of me
solid waste problems facing their community and what options are available.

       Several ideas are worth pubfldzing a year or more before a possible rate
       1.    The fact that a new rate system Is wider consideration
       2L    Present and future costs of waste service, possibly broken down to
            a per customer figure:
       &    Lower cost of operating a recycling system
       4.    Environmental strain of waste disposal
       &    Examples of other places whk^ have had succsss rmndBng simaar
                 *     .. 	....•••"•.-.                              ^
Customer involvement in the planning stages of a new solid waste system will
improve people's-attitude toward the changes and will allow the creation of a system
that is appropriate for your community.

People do not like to be told to change their habits, but they often will change them if
they understand the reasons for the change, and what that change can do for them.
An awareness of local solid waste problems that precedes a formal rate change
proposal will result in stronger community support for waste programs both before
and after their implementation.

      Tactics for publicizing  this  information include:

    o Discussions with a citizens' advisory committee
    o Press releases
    o News conferences
    o Media interviews with  public figures and administrators
    o Presentations at schools and community organizations
Phase 2:  Pubic dacuaafan and debete-The "We hope to go this way" phase.

This phase begins after the local solid waste agency has created a proposal for a
system change on the) basis of information gathered during phase 1.  Writing a
detailed proposal for the system change will aHow in-depth debate on afl aspects of
the proposal  Such debate can lead to a modified proposal which will be  more
appropriate and mom widely supported in your community.

Reporters and customers wi ask a tot of questions during this phase, and the
questions will be complicated.  The proposal should not be announced until rt can  be
supported with detailed information on:
                                     I. 62

    o  How the new system will work
    o  Fairness and incentives under the new rate system
    o  Numerical recycling and waste reduction goals of the new system
    o  Cost avoidance through recycling and waste reduction
    o  Potential for tower bills (emphasize "Control" over bills, and the fact that
       customers pay bills, not rates!
    o  The experiences of other cities using  volume-based rates

This information can be effectively distributed through the combination of a Media
Briefing, a series of Customer Forums, and  a Public Hearing.  A mailing or "door
hanger" that explains the new rate system and  provides a schedule of Customer
Forums can help involve more residents in the  decision process.

The Media Briefing should be thorough and long.  If possible, it should be co-
sponsored by the head of the local solid waste agency, members of the citizens'
advisory committee, several high  ranking members of local government, and recycling
advocacy groups.  Meetings with editorial boards can also be helpful.

Because reporters' questions are likely to be difficult and possibly hostile, it is
important to anticipate objections to the new system  and be prepared to answer them
effectively, emphasizing that added burdens under a volume-based rate system  are
generally borne by parties whose waste collection costs were artificially tow before.
Carefully chosen charts and graphs can be  very helpful in explaining the  proposal.

In addition to providing detailed information  on  the points listed above, the Media
Briefing provides a good opportunity to announce Customer Forums, which can be
held over a period of several months at various locations around the community.
Distributing Press Packets (including a schedule of Citizen Forums) can provide
reporters with a supply of accurate information  and a nudge to publish the  Customer
Forum schedule.

Even after the initial press briefing, the media can be a valuable community relations
asset  Consistently providing informative press releases to reporters can help expose
a large number of customers to solid waste issues and proposals, and can prepare
them for eventual change.

During Seattle's recant rate re-organization,  the Solid Waste Utility produced a
"Weekly BuftetirT to keep local media, including small neighborhood newspapers,
informed on sold wast* issues.  After the new  rate system was approved, the Bulletin
kept local media informed on Seattle's progress toward recycling  and waste reduction
goals and other waste system developments.  Seattle's Bulletin was discontinued  after
eight months when questions about garbage began  to subside.

The Customer Forums  provide an excellent  opportunity to gather  suggestions and
build support for solid waste programs and their goals at the grass roots level. Co-


 sponsorship of customer forums by a neighborhood leader can help create a feeling
 of customer involvement in the planning process and increase attendance at the

 Focus groups can discuss particular system change issues, such as changes in the
 rate system.

 A Customer Forum is not  a hearing in a technical sense, in that it is not designed as
 an opportunity to have comments included on an official record. Rather, it is an
 opportunity for interested customers to hear about proposed changes, and a chance
 for planners to get a sense of customer attitudes toward a new system.  Customer
 Forums can cover the same material presented in the Media Briefing, only less detail
 will probably be necessary.  The idea of ratepayer control over bills is likely to  be well

 Speakers - probably  solid waste staffers - should be prepared for difficult questions,
 since people who take the time to attend this type of briefing are likely to be well
 informed and curious.

 If customers' comments overwhelmingly favor a change, making that change can
 increase customers' sense of ownership and involvement in the new system. Such
 an attitude can only help make  implementation easier.

 A Public Hearing can be an  excellent finish for phase 2.  Laws in many jurisdictions
 require such a hearing, but a hearing is a good idea whether required or not  If
 citizens have serious concerns which have not been addressed, it is important  that
 their concerns be aired and  considered.  Clear graphics explaining options, savings,
 and the concept of control over bills will be particularly helpful.
Phase 3:  Pre-education and skjrHjp-The Tnis is what*s going to happen" phase.

Once a final plan has been adopted, the solid waste agency must make customers
aware of their new options and responsibilities aa quickly as possible.  Although a
full-on media btitz can be expensive, it can pay for itself by making customers aware
of the new system and their new responsibilities.  An information packet delivered to
ail customers can help clarify details of the new system.

Other valuable pubficrty tactics at this point include newspaper feature stories,
question and answer phone lines, and informational inserts in utility bills.

In the case of a variable can rate system, election of service level and options is the
primary responsibility of the customer, and is the heart of the system.  Customers
should be allowed several weeks to make their subscription level decisions, so that
**iey have time to "practice* waste reduction and  recycling to find out how many cans
they really need to subscribe to.

 Information campaigns will probably be most effective if they do not have to compete
 with other mail for customers' attention.  Holiday seasons and the months preceding
 elections are examples of bad times to ask customers for service level decisions,
 while early fad, when children are heading back to school, is a good time to ask
 customers to learn something new.

 Information packets, inserts and word of mouth wiU not reach all customers.  It is still
important to provide as much information as possible to local media and to answer
citizens' and reporters questions.

For subscription systems, customers who have not selected a service level by a
deadline should receive second notices or should be telephoned, if possible.
 Customers should be warned in advance that  they will be assigned a "default" service
level if they do not return subscription materials to the sold waste agency by a
4. Continuing education and pubic retations-The This is how it is* phase.
Once the new system has taken effect the important public relations tasks include:

      1.     Making service level irrforrnation available to people who are unaware of
            the new system.
      2.     Providing system information to people who have just moved in.
      3.     Community promotion of recycling and wast* reduction through such
            programs as cash prizes for perfect recyders and diversion competitions
            between neighborhoods.
      4.     Keeping the media and citizens informed on progress toward program

A variety of programs could be viewed as "public relations" programs, including waste
reduction education, block leader programs, and other recycling promotion.
Continuing promotion helps keep people aware of the "pries signal" sent by volume-
based rates.
                                     I. 65

The cost of public relations will depend on the size of the community and the level of
public relations activity that is necessary, depending on the level of the community's
solid waste knowledge.  Public relations consulting service is widely available, and
costs vary with level of service.  In general, the person you choose to direct  your
public relations efforts  should be able to write well,  should have experience in
community work, and should be familiar with your community.

An  ideal public relations staffer would have expertise in both solid waste and public
relations, and would be able to provide a bridge between professionals in those two

The public relations duties of the Seattle Solid Waste Utility are handled by two full
time employees and one intern. Seattle pays its public relations consultant
$300,0007year (out of a total utility operating budget of about $43 million) for services
including public relations program  design,  brochure design and printing, and
coordination of advertising and promotion.

Public relations costs can be high, but are necessary in light of their contribution to
reduction  of collection  and disposal costs. As landfilling and incineration  costs rise,
devoting resources to  public relations becomes  increasingly cost-effective, especially
with its vital impact on  waste reduction.

 New recycling and landfill legislation has helped make a volume-based rate system an
 appealing option in many states. Existing law can affect the level of difficulty
 associated with a move to a volume-based rate system.

 The legal powers necessary for a solid waste agency to charge for refuse collection
 service on the basis of volume generally either already exist or can be created
 through a local ordinance, if the local political dimate permits.  Some states may limit
 local agencies' power.  Legal questions must be answered on a state by state basis.
     Several tegat situations can affect the ease with which a volume based tiling
     system can be irnplernentecL  Ic^a^, ajijriscfi
 Since refuse service benefits everyone, including people who generate no waste or
 self-haul their waste, mandatory refuse service is a reasonable rate option.

 The power to set rates for a refuse franchisee must be specified in state taw.  Where
 state law does not delegate this power, municipalities may not have the power to set
 rates in exchange for granting a refuse hauling monopoly. This issue is an important
 research topic for jurisdictions considering a move to volume-based rates under a
 franchise collection system.

 Combining refuse billing with water or electric billing can provide the opportunity to
 enforce payment by  threatening shut off  of water or electricity service.  Alternatively,
 state law can provide the municipality the power to enforce bills through the
 placement of liens on delinquent properties.  Lack of such enforcement power does
 not make a volume-based rate system impossible, but it can lead to account
 delinquency problems.

 When Seattle put its billing system to bid, private contractors could not match the low
 costs of the City' Utility Billing System (UBS) because of costs related to billing
 enforcement  The delinquency rate on Seattle's garbage bills is extremely low.20

 Revenue bond agreements or state law may require revenues to exceed costs by
 some margin.  Such a requirement can compel the solid waste agency to set rates
 very conservatively to be sure of meeting their revenue recovery requirement
 Conservative rate setting is recovering a  large portion of costs through a fixed charge,
 and recovering only  variable costs through the variable portion of the rates • a
 practice which leads to revenue stability, but creates weak incentives  for recycling.21
Flexibility to Perform Services (Other than traditional collection and disposal of refuse)

In the State of Washington, electric utilities ant permitted to spend money on
conservation programs.  They art not limited to spending money on direct provision
of electric service.

Likewise, sotid waste management agencies in Washington are allowed to spend
money on pubfic relations, recycling, and waste reduction programs, even though
those programs are not directly involved with  the traditional take out the garbage"
mission of sold waste agencies.
    20 The reasons for Seattle's low delinquency rate are discussed in the footnote on
page 11.26.

    21 The tradeoffs associated with these decisions are discussed in section 11.3.1. page

                                       I. 68

Such flexibility, which may not be available in all states, can be important to the
development of positive customer attitudes toward the new rate system and recycling
programs.  Since recycling '» usually the most important alternative to disposal, the
effectiveness of an existing or proposed recycling program can be an important
consideration to a jurisdiction considering changes  to its rate system.
Most jurisdictions already have laws against illegal dumping and/or burning of refuse.
A volume-based rate could lead to the need for increased enforcement of these laws.

Powers listed above are generally codified through local ordinances, but State law
limits what local ordinances can do.  Researching state law is the only way to
discover what a solid waste agency's powers and potential powers  are.

There are a number of possible sources that may be available for funding the set-up
and/or operation of the new solid waste system. The legality of these options will
vary by jurisdiction, and should be checked with legal and financial advisors.
However, some possible funding options include the following:

 o   Grants - It may be possible for the jurisdiction to obtain at least some funds
      from grant sources.  Some jurisdictions have been able to obtain funding for a
      variety  of expenses from grant sources.

 o   Bonds  - Bond funding may be an alternative for some jurisdictions.  For the
      types of expenditures considered here (setting up a new rates system or a
      recycling program), the jurisdiction may only be able to obtain short term
      financing (with the bond payments spread over a maximum of about 5 years
      according to a financial firm).  Operational investments of this type do not
      generally qualify for 20- or 30- year bonds financing.  Options may include
      revenue bonds or general obligation bonds.

 o   Advance billing - Capital may be able to be raised for the set-up costs
      associated with a new billing system by billing customers in advance for their
      first month or two of service.  This will essentially be an interest-free loan from
      customers. Advanced billing is used in some solid waste jurisdictions, and is
      routinely used by phone companies  and the cable TV industry.  Benefits
      include the fact that these are the customers that will  benefit from the system.
      Also, because service is billed in advance, the number of bill  nonpayment from
      customers leaving the system are lower.  Negative aspects are that billing in
      advance can significantly complicate billing systems, and may be difficult  to
      implement in a bag system that has no customer charge. It may also lead to
      more confusion on the  part of customers, increasing the burden on customer
      service representatives  as they defend the rates system and issue more

 o   Requiring a customer deposit - Customers could be  asked to leave  an initial
      deposit for service. This option is very similar to the  advance billing  option.
      The deposit could be for the cans if they are supplied as part of the solid
      wast* service.  They might also be a deposit to prevent non-payment of last

 o   Variety of user fees - The jurisdiction could establish a set of user fees that
      would be used to fund the changes. Although this system would be good for
      on-going costs, it would not likely assist with set-up costs.  These couW  De
      fees on garbage collection, use of landfills or incinerators, or on
      recycling/diversion programs.

       Surcharge - The jurisdiction could establish a surcharge on the solid waste bill
       or on the use of transfer, landfill, or other services.  A surcharge on the landfill
       rates might be especially appealing because.it would provide appropriate
       incentives to users.

       Taxes - The jurisdiction might try to pass a special levy for the set up  of the
       new solid waste system. If the system was charging for solid waste services
       from the property tax. it may be possible to extend that source of funding
       briefly to fund the set up of the new system.

       Per capita fees - This would be similar to the taxes mechanism mentioned

       Franchising or licensing fee - A franchise or licensing fee could be used to
       help establish programs or functions that are associated with the provision of

       General fund - The jurisdiction's general fund may  be willing to either lend or
       grant the funds for set up of a new billing system or other system changes.
       This mechanism would not be good for on-going expenses, but the jurisdiction
       presumably plans to switch to a user fees,  and the rates could be set to cover
       on-going operational expenses.  The use of a general fund "guarantee" may be
       appropriate to assist the jurisdiction during  a transition phase, until the solid
       waste system becomes independent, and has become more  consistent in its
       revenue stream.

       Leasing - The jurisdiction may be able to lease, rather than purchase
       equipment needed for the new system. This may be particularly applicable in
       the case of obtaining computers for a  new billing system.

       Leaseback - Under this arrangement,  a private enterprise would purchase
       equipment according to the specifications of the jurisdiction, and then lease the
       equipment back to the jurisdiction.  This is  particularly applicable to capital
       investments like incinerators.

       Contracting - The jurisdiction may be  able to negotiate contracts for services
       that alow the private contractor carry the burden of the initial set-up costs.  For
       instance, by negotiating a strict per-ton fee as the payment method for a
       recycfng program, the jurisdiction would not need to raise the up-front capital
       for the program. The capital outlays would fal on the winning bidder.
For large capital facilities, the most common funding sources would include:  grants,
GO bonds, revenue bonds, private funding, or leasebacks.  For large capital
expenses, the bonds could bs issued for substantially longer periods.

 Presumably a jurisdiction would not rely on any one of these sources for the full brunt
 of funding a set of system or rate changes. Rather, the jurisdiction would look to a
 combination of sources.  For example, in funding its system changes the community
 of West Linn,  Oregon used a variety of mechanisms, including a franchise tee,
 surcharge, can charge, composting fee, grants, and taxes.

There are also good reasons that the jurisdiction may wish to set up its solid waste
services as a separate enterprise fund or a utility. Making the solid waste services  a
separate, self-supporting enterprise fund serves several purposes.  It can take the
funding of  aggressive recycling programs out of the budget cycle, subject to
comparisons or competition with the need for other social services; and  it can  make
dearer the costs associated with  running the solid waste  system so that those costs
may more  accurately be  reflected in the rates.  Electric or water services are usually
performed  by  a utility.  Similar treatment may make sense in the provision of solid
waste services.

                                 8J) SUMMARY
Part .1 discussed the feasibility of a volume-based rate system in your community in
terms of financial impact public and political attitudes toward such a change, and
legal issues involved with a changed rate system.

The  financial impact discussion concentrated on "Avoided COST, the money a
community can save by DfiJ disposing of material.  Since volume-based rates provide
a strong incentive to recycle, it is important to find out what financial  effect large scale
recycling will have on your community.

The  financial impact discussion also addressed Waste Reduction and Illegal Dumping,
both of which are important issues  where customers have an incentive not to dispose
of waste.
The  second section discussed volume-based rates from a political and public relations
standpoint  This perspective is important because volume-based rates are designed
to change customers' behavior.

The  description of legal issues pointed out areas of state and local law that may be
involved in the transition to a volume-based rate system.  The final section discussed
options that the jurisdiction may wish to explore in financing system changes.

These issues are important considerations.  Still, other factors can be important to
planners, and the final decision as to whether  to pursue a recycling program or rate
incentives  for such a program can only  be made by the officials on the scene.



    Introduction	II. 2
 1.0  Rat Fee Rate Options	II. 5
 1.1  Flat Fee - unlimited pickup for a fixed price	II. 5
 1.2  Flat Fee with Recycling Credit - discount for participating	II. 8
2,0  Volume-based Rate Options.	II. 12
2.1  Variable Can System	II. 12
2.2  Bag, Tag, or Sticker System	II. 17
2.3  Variable Can Rates vs. Bag/Tag System	II. 21
3.0 Additional Volume-Based Rate System Issues	II. 31
3.1 Steepness of the Rate Structure	II. 31
3.2 Charges for "Extras" - prepaid bag/tag system vs. charges on the bill	II. 34
3.3 Curbside vs. Backyard Collection - voluntary vs. mandatory	II. 40
3.4 Mini-Can, Zero Can, and Mini-Bag - options for low service levels	II. 46
3.5 Bi-weekly Pickup - another option for low service levels	II. 50
3.6 Recycling Credit • discount for participating in recycling programs	II. 52
3.7 Rates for Recycling or Yard Waste Programs	II. 55
3.8 Rates for Compacted Waste	II. 59
4.0 Rate Options for Low Income Customers	II. 64

5,0 Rate Options for Mutt-famiy Rates.	II. 69

ao Summary	II 74

When a jurisdiction begins to consider modifying its solid waste system by
introducing variable rates or designing recycling programs it will generally want to
analyze a broad range of  solid waste rate design  options and their implications on
the new system.  In this chapter, a wide variety of rate design options and issues
are discussed and evaluated in detail.  Both conceptual discussions and evaluations
of operational options are considered.  Each jurisdiction should examine the options
and decide on the integrated system that best suits its particular situation.

There are a number of reasons that a solid waste jurisdiction might consider
changing the structure of its rates.

         o   Reduction of the waste stream  may be a major jurisdictional objective-
             an examination of the role that  rate design can play in the
             encouragement of recycling in order  to meet waste stream reduction
             goals may be appropriate.

         o   New programs (for example, curbside refuse collection or recycling
             programs) may require structural changes in rates because they  will
             change the revenue requirements for the jurisdiction. Consistent and
             well-designed price incentives will be needed to encourage efficient use
             of programs  and services.

         o   To increase rate equity between and within customer classes, rate
             design and/or cost allocation changes may be necessary, and may
             impact the structure of rates.

        o   An outside or governing body may have requested an  analysis of these
            types of issues.

        o   Ftnafly, changes in the billing system may prompt such an analysis.
This section it organized aa follows.  The first pan summarizes the rate options to
be discussed. Next, a sat of criteria to be used in evaluating the relative strengths
and weaknesses of the rate design options is presented.  Than each rate design
and its performance is discussed and evaluated according to the criteria.

Each of the rate design options in this section are discussed using the following
general formal

         o  statement of the rate issue being discussed;
         o  background/definition of the rate option (s);
         o  discussion of the rate's performance on the basic criteria;
         o  a summary of the option's strengths and weaknesses.

The issues and options discussed in this section are certainly not comprehensive,
but provide information on some basic choices and offers a method for evaluating
rate alternatives that may be appropriate to your jurisdiction.
Rate Design Potion Evaluation Criteria

The following criteria are used to evaluate the structural rate design options:

        o  Recycfng and Waste Stream Reduction incentives • Rate structures
            should encourage recycling activities and enhance waste stream
            reduction programs.  This also includes effects that pricing strategies
            may have on illegal dumping.  (This criterion is related to economic
            efficiency but because of the special emphasis, they will be discussed

        o  Equity and  Economic Efficiency criteria • Preferred rate  designs would
            be perceived as fair and equitable, would be cost-based, and would
            provide price signals that encourage efficient use of the resource. This
            includes fair apportionment of costs among different consumer groups.
            Efficiency refers to effectiveness of pricing signals in controlling the use
            of the service, and in controlling the usage of different types of service.
            Immediacy  of the pricing  feedback is one important aspect of the
            pricing incentive.

        o  Customer Service, Stabflty. and Acceptabity criteria • Rate structures
            must be acceptable to the solid waste jurisdiction, and the  community.
            The rats structures should enhance rats stability for customer classes,
            with  a minimum of unexpected changes which would adversely impact
            existing customers. Rats  design should enhance the customer's ability
            to choose and manage service levels.  Preferred rate designs are
            understandable end can be easily explained to customers.
            Comparability  of the structures with other jurisdictions should also be
            considered. Citizens should be allowed timely opportunities to review
            and  comment during the decision process.


         o   ImpfeiTientatkan/Maimenance-retated criteria - Preferred rate designs are
             understandable, calculable, unambiguous in coverage and
             interpretation, and integrate easily into existing billing, contractual, and
             financial constraints.  Costs of implementing and maintaining the rate-
             related infrastructure should be low.

         o   Enforcement criteria (part of implementation/ maintenance, but
             important enough to separate) - Preferred rate designs would require
             minimal additional enforcement efforts.  The rate design and units of
             charge should be well defined and unambiguous, and allow
             straightforward enforceability.

         o   Revenue-related criteria - Rate designs should recover the costs of
             providing the service and provide reliable revenues.  This includes
             effectiveness in yielding total revenue requirements, predictability and
             stability of the revenue stream over time, minimizing  cash flow
             constraints, and enhancing the jurisdiction's financial position.
The discussions of the rate design options presented in the following section are
structured according to these six broad criteria areas.  However, one area requires
additional comment There are several Revenue-rotated criteria that often work at
odds to one another, confusing summarization of conclusions.  One is the stability
and predictability of revenue from customer rates.  Another is the degree to which
revenue generated will track or recover the costs of collection, disposal, and
recovery as these vary with waste volumes.  Rate options which score high  on the
first test generally do poorty on the second and  vice versa.

                         1.0 FLAT FEE RATE OPTIONS
There are two basic structures for residential rate design:  1)  mandatory, flat fee
pickup; and 2) fee-for-service.  The flat fee service is usually charged through a
mailed bill or through a tax mechanism.  The next few pages discuss variations of
the flat fee service.


To provide a simple rate structure, minimize enforcement efforts, and to provide a
stable revenue base, implementation of a flat fee rate structure is considered.


A flat fee rate structure would provide for pickup of residential waste at a fixed
charge. Charging a flat fee for all residential solid waste pickup « used in many
parts of the country.  The two  primary methods of implementing a flat fee is 1)
through a property tax, general fund, or other tax mechanism, or 2) a bill for a fixed
fee for unlimited (or near-unlimited) service. The flat fee charge  could be set by.
obtaining the total revenue requirements to serve the customers, and then divide by
the number of customers, households, or service users in that category.  Multi-
family accounts may be charged a fixed fee per unit or per building.  Alternatively,
all properties could be charged based on assessed value.


Recycfincj/waste siresHi reduction incentives
        o  Because the customer's bill does not change as the amount disposed
            increases, there are no incentives for waste reduction or recycling
            inherent in a fixed fee rate structure.  A rate structure of this type would
            not promote recycling sufficient to achieve waste stream reduction
            goals. With charges collected through a tax mechanism, customers are
            not generally aware of the amount they are paying for removal of
            waste, and would not be aware of the general cost of the status quo
            vs. alternatives.
        o  Local private recycling companies and drop off points would be h-jrt or
            may not be encouraged to start up because there is no incentive for
            homeowners to recycle.  Customers experience no savings with
            reductions in waste volume.

                                      II. 5

Equity and Economic Efficiency
        o  A fixed fee rate design is inequitable because customers receiving
            different levels of service pay the same fee.  However, the rate design
            does assure that customers receiving the same service pay the same
        o  The fees do not reflect cost of service. The jurisdiction  incurs higher
            costs (tipping, labor) picking up from homes filling more cans, but
            these cost differences are not shown in the fees charged.  Because
            customers receive no price signals, the flat fee schedule does not
            promote efficient use of services.  Customers will tend to overuse
            garbage collection service.
Customer  Service, Rate Stabtty,  and  Acceptably
        o  Unlike other types of utility services (e.g., electricity and water),
            customers have no control over the size of their bid.   Variations in the
            amount of waste disposed will  not result in savings on the bill.  Waste
            disposal behavior is not  connected to the level of the bill.
        o  Fixed fee rates are easy to explain to customers, and the structure is
            used by many solid waste jurisdictions.
        o  Straightforward discounts in the level  of the fee could be awarded to
            target customer groups (e.g., low-income) in a dear  manner.
        o  Without price incentives, the continued overuse of the service may lead
            to higher collection charges and shorter  lifetimes for  the  landfills.
            Therefore, revenue requirements may rise more quickly than if
            recyding/waste reduction incentives were provided.  Consequently,
            stability of the rates over time may be compromised.
        o  Depending on the current billing method, some customer groups may
            experience significant rate impacts. For  example, suppose the flat fee
            is being considered to replace a volume-based system.  Because each
            customer wi be paying  for the average  pickup level, those customers
            previously subscribing to low service  levels win experience a rise in
            price for service.
            Implementation of this system would be very straightforward.  The rates
            are easily calculated and are dear in coverage.
            IntegiaUon into virtually any billing system would not be very difficult
            The ultimate choice between charging through a tax mechanism vs. a
            fixed bi wC depend on computer resources and the billing systems
            that are currently set up.

         o   Enforcement under these rates would be simple or unnecessary.
         o   No incentive for illegal dumping is implied.

 Revenue considerations
         o   The fixed fee rate schedule provides a very stable source of revenue.
             The lack of ability of customers to respond to higher prices by
             changing the amount they pay assures the solid waste jurisdiction a
             predictable flow of revenue.
         o   There is no direct or indirect connection between cost incurred and
             revenues collected. Difficulties in covering costs can arise if customers
             dispose of more waste than predicted, because no mechanism exists
             to allow the jurisdiction to automatically collect additional revenues for
             higher levels of waste.  In addition, under a tax  mechanism,  increasing
             solid waste costs may cause a jurisdiction may  run up  against a
             maximum taxing authority.


 The flat fee structure generally ranks high on  implementation and revenue-related
 criteria. The rate design is easily calculated, unambiguous in coverage, simple to
 explain and  enforce, and can provide a stable and predictable revenue source for
 the solid w.   :a jurisdiction.  The flat fee structure could be relatively easily
 implemented into a billing system.

 The major flaws of this system are the lack of price signals to customers, and the
 lack of equity between customers with different service levels. Fees that are fixed
 regardless of volume do not reflect the additional  cost of providing the service.
 Customers are  used to paying for electricity and other utility  services based on the
 amount of service consumed, and making decisions about how much to  use.  With
fixed fees, customers are unable to exercise any degree of control over the size of
their bill.  In addition, with no price incentives to lower waste generation, costs may
 rise more rapidly.  The goats of waste stream reduction are not reinforced under a
fixed fee structure.

Though revenues are stable under fixed fees, costs have the potential to fluctuate
greatly. After rates are set for a given year, changing volumes of waste put out for
collection wi not result in changes to revenue.  Tonnage (and therefore, tipping
costs)  could  rise without a corresponding rise in revenues.  Under a volume-based
system, revenues can fluctuate more, but tend to foBow costs.

Under  a fixed-fee system, particularly a system that does not bill separately (e.g. tax
system), customers are not given sufficient information about the real cost of waste


 collection and disposal and any alternatives to make intelligent waste disposal
 decisions.  Indeed, organized recycling alternatives may not exist  And if recycling
 programs are established or made mandatory, customers may not have adequate
 information or incentives  to participate as fully as might be wished.   Even if the cost
 of disposal has become  a major problem for the jurisdiction, customers will generally
 be unaware of the crisis, and it may take valuable time to educate them.  Incentives
 for an efficient solid waste disposal  system do not exist with flat fees.  This system is
 not highly recommended.
                    1.2 FLAT FEE WITH RECYCLING


 Customers could be provided with an incentive to recycle by offering a reduction in
 their fixed-fee rate if they participate in jurisdiction-sponsored recycling programs.


 One option to encourage use of recycling programs is to offer a credit on the solid
 waste bill to customers who participate.  The credit coukJ take the form of either a
 fixed  amount for each participant, or an  amount based on the  customer's
 participation level.  A credit would improve the likelihood that customers will engage
 in recycling activities and achieve some  waste stream  reduction.  Decisions will need
 to be made on what program(s) are eligible for the credit  Generally, this  consists
 of certain jurisdiction-sponsored programs.1


 Recycling incentives art not present in a fixed fee rat* schedule.  A recycling credit
 provides a monetary inducement to recycle.  If the credit is a fixed amount, the
    1 In the text below, these are referred to as "eligible1' programs.  Eligible programs
are usually coiectton programs sponsored by the jurisdiction. Other recycling programs
and activities can be made eligible  by developing a coupon-like system.  Under  a
coupon system, drop-off centers could issue  coupons to customers that brought in
rscydaoies. Customers could return coupons with their partial bi payments to allow
them the same type of recycling discounts. In St Louis Park, Minnesota, a number of
non-City programs are eligible.  Operationally,  St Louis Park uses a bar code system
on  its recycling containers to identify which households participated in the program
each collection and transfers the information to the billing system.


 monetary incentive depends only on whether or not the customer participates and
 not on the level of participation.

 To encourage higher levels of recycling, the credit would need to be based on the
 participation level of the individual account  This would require the recycling
 program collection staff to keep track of amounts recycled by each participating
 solid waste customer.  In addition, this  information must be fed to the billing agent.2
To reduce complexity, the remaining discussion will look only at the fixed credit per

Recycfing/Waste Stream Reduction
         o  A recycling'credit would tend to increase participation in the recycling
            program over the level that would be achieved through a straight fixed
            fee structure.  Even a short-term or one-time credit may increase
            awareness of the programs.
         o  Customers would be given a very dear signal on their bills encouraging
            recycling, but no reward for quantity.
         o  Although the credit system provides an incentive to participate in
            eligible recycling programs, it does not provide any incentives to
            reduce waste through careful buying, composting, and other waste
            reduction activities. It also does not reward participation in non-eligible
            recycling programs.  Rewarding only one method  of decreasing
            disposed waste Witt not provide the maximum waste reduction
         o  This should not have any  impact on incentives for illegal dumping.

         o  This system would appear inequitable for the participants who recycle
            much of their waste. Those who recycle more would not easily be able
            to receive a higher credit
         o  Those solid waste customers who, through reuse  of goods and careful
            purchasing, art able to decrease their waste disposal will not be
            etigfcle for the credit  There is no method of rewarding customers who
            compost or reduce waste.
    2 Basing the level of the credit on the amount of recycling might  possibly be
accomplished by having collection staff keep track of the number of bags or containers
of recydables in routs books. This would increase the complexity of the program, and
may be less effective than having collection staff keep track of solid waste volumes for
a variable rate system for garbage collection.


         o  Customers who use non-eligible recycling options will not be eligible for
            the credit  Even if a coupon system is developed, allowing private
            recyders to issue coupons good for reductions off the solid waste bill,
            the system still will discriminate against options like  unattended drop
         o  Households participating in the program receive a credit However, the
            costs of the program are borne by all residential customers, in part by
            those customers not receiving the additional service.

Custorner Servk»/Stab«ty/Acc8ptab«ty
         o  It might be hard to explain giving the same credit to everyone
            regardless of their recycling levels, or to define the  criteria for
            participation.  Determining which programs should be eligible may also
            cause problems.

ImpionMM ilaUun/Maintefiance
         o  Incorporating a recycling credit into a billing system may require
            significant reprogramming.
         o  Information about new customer sign-ups and drop outs or
            partapants/non-partiapants would have to be transferred continually
            into the billing system from the recycling service providers to the billing
            agent, increasing work for the all players, including  the billing agent the
            customer service representatives, and the collectors.
         o  Defining program participation may be a problem.   Customers  may
            sign up for programs to get the fee savings, but may only participate in
            a minimal way, diluting the effect of the programs.  Should all
            households, regardless of participation level, receive the  same  credit?
            Should  it depend on whether or not they participate each week/month?
         o  The current curbside recycling contract or union agreements may not
            include  provisions for tracking participants.
        c   One of the benefits of the flat fee system, the lack of need for
            enforcement, would be lost  For fairness, inspectors or recycling
            collection staff would  need to periodically check up on participants.
            Depending on the credit level and the volatility of the number of
            participants, the program may significantly hurt the ability of the
            jurisdiction to predict and therefore cover revenue requirements.
            Because the same credit is given for any level of participation, there
            could be a significant decrease  in revenues without corresponding
            decreases in costs.



A recyding credit is not recommended.  This variation on the fixed-fee service
improves recyding incentives.  However, it could be costly to implement and
maintain.  Enforcement and participation issues  present problems. The waste
stream reduction incentives are not easily based on the level of participation,  which
could be perceived as inequitable.  Also the level of volume reduction cannot be
directly influenced.

Giving reduced rates for city-sponsored programs causes a negative  impact  on buy-
back centers and drop off locations, even if a coupon system is developed.  Existing
recycling is generally due to  efforts of the private recyders, and the rate structure
should not impact them by only giving credits for certain programs.  Finally,  and
most importantly,  no  incentive is given for customers who reduce their waste stream
through selective buying, composting, and other waste reduction  methods.

                     2.0 VOLUME-BASED RATE OPTIONS
 The ideal system for fee-for-service would be to charge customers as a function of
 the volume, weight and biodegradability of the customer's waste, plus a customer
 and pick up fee.  This would indicate the cost of disposal in terms of transportation
 and landfill/elimination.  However, this is not practical because the technology does
 not currently exist3

 Two options for volume-based rates are discussed below.  A bag/tag system, or a
 variable can rate system offer fairly simple and practical approximations to fee-for-
 service and represent a significant improvement over the fixed fee rate schedule.
 These systems can incorporate appropriate price signals to the customers and
 assure that the total price paid by the customer increases with increased units
 collected.  The rates allow a reflection of cost of service.

 Discussions of the basics of each of these rates alternatives are given in the
 following two sections.  To keep these  discussions simple, a more detailed
 discussion giving alternative configurations of the two systems and comparing the
 two options is given in section 2.3 of this chapter.
                          2.1  VARIABLE HAN SYSTFU

To improve the waste reduction incentives and equity between customers, consider
implementing a volume-based system that charges additional amounts for additional
waste put out for coftsction via a subscribed can system.

A variable can rate is currently being used successfully in several jurisdictions for
single famiy and multi-family customers.  Customers sign up for a "subscription
leveT, a spedflc number of cans or units of service that w* be collected weekly from
the customer. The amount of the btt is based on the service level subscribed.  The
    3 However,  preliminary experiments to examine  the  feasibility of weight-based
residential rates  are being conducted in two locations - Farmington, Minnesota, and
an EPA grant-funded project in Seattle, Washington,


 use of subscription levels serves several purposes:  revenues may not be as
 variable as under a bag system because the customer can generally not change
 service levels very often; the system can allow customers to be billed  on an advance
 billing basis4; the system provides an incentive for customers to regulate their waste
 generation; and the option does not require collection staff to carry route books to
 record actual service levels.

 Under this system, rates are calculated for each of a number of available service
 levels. The system may be structured so  that customers supply their own cans or
 special cans  may be provided as part of the collection service.  To provide more
 flexibility for customers who may have occasional additional waste beyond  the
 normally-subscribed level, the variable can system may be  supplemented with a pre-
 paid bag  or tag that would allow collection of extra waste with the normal
 subscribed waste.5


 Recycfing/waste stream reduction incentives
         o   The variable can rate design  provides recycling incentives because the
             customer's fill increases with  increasing garbage levels.  The rate
             structure tends to  reinforce recycling programs and legislated recycling
         o   Under a variable can rate, recycling incentives are truncated at the
             lowest available subscription  level.  The customer gets no additional
             benefit from reducing waste below the lowest  subscription level
         o   Customers do not get a perfect waste reduction and recycling incentive
             because their bill is based on their subscribed service level rather than
             the amount of waste they actually put out for  collection that week.
             They do not save  money on  their bill if they put out less waste for
             collection than their subscription level any particular week.

         o   To the extant that the rates more closely reflect cost  of service than a
             flat foe, the price incentives will lead to more efficient use of waste
             disposal services than a flat fee system.
         o   Variable can rates are equitable in the sense  that customers receiving
    4 Under a subscription system, a jurisdiction could bill for service in advance.  This
option is discussed in section 2.3.

    9 Options for the collection of "extras' are discussed in section 3.2.


            the same service levels pay the same, and those receiving higher
            (lower) service levels pay more (less).  Enforcement can improve
            equity by helping to prevent people at similar subscription levels from
            paying the same fee for different levels of service.
            Although the equity in terms of payment is better than a fixed fee
            system, the system is not perfect  Customers who subscribe to similar
            amounts pay the same, but that does not mean that customers who
            put out the same amount of waste pay the same.  If someone puts out
            less waste than subscribed, they pay the same as  someone else who
            may have filled up the subscription level.
            Low income customers can easily be given discounts under this
Customer servtce/acceptabSty/stabfity
        o   Variable can rate structures are used in several other communities and
            are understood, well-accepted, and effective.
        o   Customers can choose their own basic service level.
        o   Customers generally should find variable can structures palatable
            because they can exercise some control over the level of their bills.
        o   Reactions from customers may vary based on the level of service they
            subscribe to.  Customers who subscribe to less than the average level
            of service may pay lower bills than they did when they paid the
            •average" fixed fee, but the system assures big users of the system will
            pay mom.
        o   The stability of rates over time may be affected by the method  in which
            costs are allocated.  However, volume-based rates may be among the
            best designs in terms of leading to smoother  rate movements over
            time. In addition, long run costs of the system win likely not rise as
            quickly as they would under a fixed fee system.
        o   The rats system can integrate well with recycling programs and goals.
        o   Customer service wifl be more complicated than with a fixed fee
            system. The jurisdiction may need to deal with questions about how
            extras am dealt with and clarifications about changes in  subscription
            levels and billing.  The impact on customer service staff  can be
            mitigated somewhat if customers art only  slowed a limited  number of
            subscription level switches during a year, or if they must pay a fee to
            switch levels.
            ReW implementation wiO be more complicated than with a fixed fee
            system.  Staff will need to respond to customer complaints  about
            missed collections,  service level disputes, billing questions, and a
            number of other field questions.


         o   If the jurisdiction decides to supply official cans, delivery will entail a
             considerable amount of effort and cost.
         o   Implementation into a billing system may require significant
             modifications, and depending on the funding mechanism currently in
             place, this may require a significant capital investment (computers).
         o   Rates will be more complex to calculate than under a fixed fee system.
         o   Whether the system can be tolerated under current collection contracts
             or collection staff work assignments will  need to be examined.

         o   Some degree of enforcement may be appropriate to assure that
             customers are not putting out more waste for collection than they are
             paying for.  An "honor" system, with no  enforcement, has been used
             successfully in some jurisdictions.  However, some jurisdictions may
             need more enforcement than that.  This decision would be based on
             an analysis of the illegal dumping or service level  cheating likely in their
             community.  Increased enforcement over an honor system may be
             needed to ensure fairness.
         o   A system of official toters could be used to simplify enforcement. The
             number of toters issued to a  household would correspond with the
             subscribed service level. Then, collectors would be aware that any
             waste outside the toters was  not paid for.6.
         o   The  incentives for the illegal dumping or burning of waste will likely be
             higher than  under a fixed fee system. The level of illegal disposal  will
             depend on the level of the variable rates and the  inconvenience of the
             collection system. Mitigation  of these negative impacts will probably
             require the jurisdiction to educate customers in waste reduction
             techniques,  advertise alternatives, and provide convenient recycling
                   for residential customers.
            Predicting revenue to the jurisdiction becomes more difficult under the
            variable can structure than under fixed fee designs because customers
            are allowed a method of price response  (i.e., changes in subscription
            level).  Poor predictions of service levels  can lead to revenue shortfalls
            or over-collection of revenues.  However, if customer rates are set to
            cover the cost of service (more or less),  a mis-estimate of service levels
            wil still allow that at least variable costs are covered.   Fixed costs that
            were apportioned to service levels that were not purchased may  not be
    6 This type of system was introduced  in Seattle, Washington in  1989 ana  Kas
proved successful.

             recovered.  Unlike fixed fee systems, the revenues vary somewhat with
             the costs incurred.
         o   Stability of the revenue source will depend on subscription response to
             th« rate ehanaes.
the rate changes.

Variable can rates are recommended.  Although charging based on actual service
usage or on smaller units than cans would be a closer approximation to fee for
service, variable can rate structures offer a practical variation on this principle.
Variable can rates are preferred to flat  fees because they send  appropriate price
signals and waste stream reduction incentives to customers, and prevent overuse of
solid waste services.  Customers pay for what they use and those who use more
service pay higher prices.  Customers  receive incentives to reduce waste disposed
through a wide range of waste reduction and recycling behaviors.

Significant  work may be needed in developing compatible enforcement provisions,
modifying the billing procedures, and implementing the rates.  The billing system
requirements may prove a barrier to some smaller jurisdictions or those without easy
access to computer equipment to handle the more complex billing necessary.

Variable can rates can offer longer term rate stability in several ways.  With more
efficient use of solid waste services, long run costs may be tower than with a fixed
fee alternative.  In addition, variable can systems offer more flexibility to approximate
a variety of cost functions, and can let customers keep better control over the size
of their bills.  If handled properly, variable rates can get strong customer and
political acceptance. The rate is preferred to flat fees because it allows customers
to choose  their own basic service level, gives customers a "rxxmaT  level of waste to
try to stay  within, reduces the regular need for purchasing bags or tags except for
peak periods, and because It more easily aflows for unequal pricing differentials
between service levels.

Variable can rates are a very workable method of providing customers with
incentives to reduce waste and recycle. They work weU with recycling programs,
and provide customers with a good connection between their waste disposal
behavior and their bifls.


 To improve the waste reduction incentives and equity between customers, consider
 implementing a volume-based system that charges for waste put out for collection
 via a bag or tag system.


 A bag, tag, or sticker system is currently being used successfully in several
 jurisdictions around the country.  Under a bag system, customers put out waste for
 collection in official bags that they purchase from the solid waste jurisdiction or  its
 agents.7   Only waste that is in the official bags is collected.  Under a tag or sticker
 system, customers purchase special  stickers or twist-tie tags, which must be affixed
 to their waste for it to be collected.   A discussion of the criteria for selecting a bag
 vs. tag vs. sticker system is presented in section 2.3.  For simplicity in the
 discussions that follow, the term "bag" will imply either the bag or tag system.8

 The charge for a bag/tag system could be configured in two basic ways.  One
 option would be to have the price of the bag include the full costs of providing
 collection, hauling, and disposal services.  Another option would involve breaking the
 price of service into two pieces:  a customer charge, and a per-bag additional fee.
 Generally, the customer charge would include components of the fixed cost of
 providing solid waste service (having trucks on the street  administration, etc.), and
 the bag costs would reflect the variable components like disposal fees, etc.  A
    7 In some jurisdictions, the special stickers or bags are available from jurisdiction
staff, over the phone, at community centers, or from convenience or grocery stores.
Making bags available at a variety  of outlets makes the system more convenient to
customers.  In some jurisdictions the retail outlets sell the bags as a public service; in
other areas, the jurisdiction provides a commission for  sales.

    8 Another variation of this system would involve having collection staff record the
number of containers,  bags, or bundles  of  waste put out for collection by each
household in a route book or recorder system. Each household's service usage would
then need to be transferred to a billing system.  Under this system, customers would
not need  to purchase special bags or tags, but would be billed based  on service.
However,  this, system  would  be labor-intensive,  may  be  impractical  in  larger
communities; and requires a fairly  sophisticated  billing system.  This system  is not
discussed separately in section 3.2.  The incentives under such a system would be
similar to the discussion of the bag/tag option.


 jurisdiction could adopt either of these pricing structures or one in-between the two

 In.some cases, the customer charge is just that and all bags are purchased
 separately.  In other cases, the payment of a monthly bill might entitle the customer
 to put out one or two bags per week.  Extra official bags could then be purchased
 at a price if extra waste is put out  Alternatively, the payment of the property tax or
 annual fee  might entitle the customer to a limited number of bags (e.g., one per
 week, or 52 bags), which would be supplied at one time. The customer could then
 supplement these bags with additional purchases of official bags.  These alternatives
 are discussed in more detail in section 2.3.


 Rscycfng/WastB Stream Reduction Incentives
         o  Charging by the bag increases recycling and waste stream reduction
            incentives beyond the simple fiat fee.
         o  If there is a basic or minimum service level associated with the system,
            there  is no monetary incentive for recycling to reduce disposal below
            that level. Unless the basic level is set at a low service level fi.e. one
            bag),  maximum recycling potential may not be achieved.  Households
            that could do a better job of limiting waste would not be rewarded.
         o  A system that requires purchasing bags or tags provides a fairty
            immediate price incentive to reduce waste.
         o  There may be some preference for a tag system over a bag system in
            areas that want to avoid the appearance of contradicting waste
            reduction or encouraging plastics in the landfifl.

 Equity and Economic UHciency
         o  Charging for extras via some method  is important for equity
            considerations.  Customer* using more service pay more.
         o  Using bags or stickers implies that each additional extra is charged at
            the same rat*.  The rates for additional service units cannot echo
            increasing or decreasing rats structure differentials.
         o  Equity issues arise defining the basic  service level  Should all
            household* be assigned the same basic level, regardless of size of
            household?  That level affects the number of extras a household
            would have to pay for.

Customer Service,  Stabfty. mA Acceptably
         o   Bag/tag systems are used in several communities and are weJI-
            accsptsd and easily understood.
         o   Customers generally should find bag/tag rate systems palatable


            because they can exercise some control over the level of their bills.
            Reactions from customers may vary based on the level of service they
            use.  Customers who use less than the average level of service may
            pay lower bills than they did when they paid the "average" fixed fee,
            but the  system assures heavy users of the system will pay more.
            Rate stability over time should be better with the bag/tag system rather
            than a strict fixed fee scenario because the price incentives encourage
            more efficient use of the service, long  run costs of the system will likely
            not rise  as quickly as they would under a fixed fee system, and
            revenues can vary more directly with costs.
            Public information efforts will be needed to explain the system to
            customers and to maximize effectiveness.  However, the basic rate
            system  is fairly easy to explain.
            A bag/tag system may be somewhat inconvenient to customers.  They
            have to  purchase bags or tags and make sure they  have enough on
            hand for their weekly waste needs.
            Depending on the number of places that the bags are made available
            for sale, customer service staff may need to be increased.
            Giving rate reductions to target groups (e.g., low income customers) is
            relatively easy to implement and can be done through the basic
            charge alone, or special reduced-price bags or tags can also be made
            Prediction of revenues may be made more complicated because of the
            flexibility of this system.
            The rate system can  integrate well with recycling programs and  goals.
         o  Collection staff must be aware that only paid items should be collected.
            This may not be a problem, but depending on the collection
            arrangement used in the jurisdiction, proper incentives may  need to be
            provided to collection staff to  pick up only paid items, either through a
            revenue-sharing arrangement  or some other method.9
         o  Rates wffl be more complicated to calculate than  under a fixed fee
         o  A bag or tag system would entail additional work in sales and
            customer  informatioiVacVertising.  If sales are not handled by the
            jurisdiction but through an arrangement with agents, a commission
    9 The City of Seattle uses contracted haulers for garbage collection, and snares
$1/tag of the revenues from the stickers with the haulers.  This provides some degree
of incentive for the collection staff to encourage use of stickers and not pick up unpaid


             system may need to be set up.
         o   Current health restrictions may not allow food waste to be placed in
             bags.  Health code regulations may have to be changed, or the official
             bags or tagged waste could simply be placed inside normal garbage

 Enfoi cement
         o   A bag/tag system could be easily enforced.  If the waste is beyond the
             basic service level and it is not property labelled, then it is not
             collected. No records of extras need be kept
         o   A pay-tor-service  systam may tend to encourage illegal dumping to a
             greater degree than a system that allows unlimited  service for a fixed
             fee.  However, this has not been a problem in many jurisdictions in
             which these systems are in use.  Also, by offering legal and fairly
             simple alternatives for disposing of extra waste, tha problem may be
             reduced.  Requiring some "basic" level of service for a customer charge
             may also reduce  the incentive for illegal dumping.

 Revenue Related  Criteria
         o   Costs and revenues would tend to move together more  than with a
             strict fixed fee system.
         o   The  level of revenues received by the solid waste jurisdiction could vary
             considerably based on tha number of bags or tags used by customers.
             The  level of revenue variation depends on tha amount of the fixed
             systam charges that are placed on tha price of tha bag  or tag.  To the
             extant that a customer charga is usad for tha fixed costs of the system,
             this risk and variation is reduced, but at tha cost of providing  lower
             recycling incentives on tha  price  of tha bags.


A bag/tag systam drarnaticafly improves recycling incentives over a flat fee system.
It is fair, in that it  coats more for customers to dispose of more waste.  In addition, a
bag or tag systam aflows considerable flexibility (and potentially  fairty  small
increments)  for tha waste customers put out and pay for.  Customers pay  for
service on tha basis of the actual amount of waste put out for collection.  Customers
have control over tha (aval of thair bills, and changaa in thair bahavior can directly
reduce their b«s.

In addition, a bag or tag aystam doaa not impoaa a big burdan in satting  up the
systam.  If tha price of tha bags includes tha  fuH cost of disposal, tha system may
naad no billing systam.  If a customer charga is usad, it can ganarally ba worked
into whatever bifling method ia usad for tha existing flat fee or tax-based system.


 No new computer system needs to be introduced.   However, as with any change in
 the system, customer outreach explaining the system will be needed for the system
 to work effectively.

 Revenues under this system may be difficult to predict, at least at first until customer
 waste disposal behavior becomes better known and customers adjust to the system.
 A phase-in period (a year or two) may be appropriate, during which the solid waste
 agency may receive financial backing from taxes or other funds,  if needed.  This
 financial fall-back has been  used in some jurisdictions when setting up a new
 bag/tag system.  However,  the system can be expected to stand on  its own after
 the initial period.

 tf the jurisdiction opts for a  system with a basic service level, the basic level  should
 be set relatively low to maximize the waste stream reduction incentives.  Otherwise
 customers do not get the savings incentive to reduce waste below the lowest
 service level - the recyding/waste reduction incentive is "truncated" at the lowest
 service level and full  waste  reduction potential would not be reached.  Enforcement
 would not be very complicated if all households are assigned the same basic
 service level (whether zero or a positive amount) - identifying extras that require
 payment is simple.

 Problems may arise with a low basic level of service. With a bag or tag system, any
 waste beyond a  basic level would require a prepaid label.  Customers with chronic
 volumes  beyond basic will need to purchase bags, make sure they have enough on
 hand, and use the bags every week.  Unless auxiliary sales outlets are used, bag
 sales could become  an  administrative burden to the jurisdiction.  Low basic service
 levels may also possibly lead to more illegal dumping from customers who
 subscribe to the lowest service to save money and cannot fit their waste into that
 volume or choose to avoid  purchasing any bags/tags.

 A bag/tag system provides a very good option for a volume-based rate system. It
 provides good waste reduction incentives, and can be set up fairly easily, even for
jurisdictions that  may be converting from property tax-based funding systems.
 Customers pay for the amount of service they yjfi. and there is  a dear relationship
 between behavior and bids.
Both major types of variable rate systems - variable can and bag/tag systems - are
effective at encouraging waste reduction and recycling, and are practical solid waste


 rate systems.  This section discusses the variable can and bag/tag systems in more
 detail, It gives some alternative configurations of the  system along with strengths
 and weaknesses.  The last part provides a comparison  of the two systems, and
 general conclusions about the appropriateness of the two alternatives for
 jurisdictions wishing to implement a volume-based solid waste rate system.

 Configuration of the Variable Can System:

 Variable can systems have been in use for some time in several cities.  Under a
 variable can system, customers select a service level that reflects the normal  number
 of cans of waste that they expect to dispose of each week. That "subscription level"
 is then used as the basis for billing that customer for collection and  disposal
 services. The jurisdiction establishes rates that increase as the number of cans
 subscribed increase.

 In the operation of the system, a mechanism must be developed for customers to
 convey their service level request to the jurisdiction.   This can be a fairly labor-
 intensive process when new rates are put in place, when programs are introduced,
 or customers have  other reasons for changing their service levels.

 In a variable can system, cans are supplied by either customers or by the
 jurisdiction.   Seattle, Washington, implemented variable can rates in 1961. Through
 1988, customers were required to supply their own cans.  The City generally relied
 on an honor system for enforcing service levels.  This system worked very well.
 However, in 1989 the city changed to a semi-automated collection system, and
 specially-sized totem were delivered to residents based on the subscribed level of
 service. As a side  benefit to this new system, the enforcement of service levels  and
 the identification of  extra  waste was greatly simplified. Other jurisdictions rely on a
 system with customer-supplied cans and the collectors  refer to route books to
 monitor service levels and identify extra waste.

 Sections 3.0-5.0 discuss some of the enhancements and variations that may  need to
 be combined with a variable can system.

 Structure of Rates:  There are few differences in the general structure of variable can
 rates. Al costs are embedded in the rates that are then baled on the basis  of the
 number of service levels  provided.  However, the rates  for each service level may be
different from the estimated cost of providing that service level  A jurisdiction can
use poflcy reasons  to lead the rates to have increasing or decreasing differentials
between service levels.  However, under variable can rates, it is generally true that
afl customers share in covering the fixed costs of the system, and that the fixed

 costs are usually assured of being recovered.10

 Some jurisdictions base the rates on all costs of providing the full range of services
 and then let customers use special services or not.  Other jurisdictions break the
 rates into pieces and let  each type of service generally cover its own costs - a fee-
 for-service approach.  Other variations in the structure of fees include variations for
 low income customers, and special rates for premium services.11

 Baling:  A variable can system requires a fairiy complex billing system.  It must be
 able to  retain the name, address, and service level of each customer in the system.
 It must  be able to calculate bills based on the number of service units subscribed,
 the rate class or type of  customer, as well as any additional services that may  be
 used.  If the system is meant to be able to handle inquiries from customers, it  must
 be  fairiy accessible to customer service staff.  Although some systems charge for
 occasional extra units of  waste via a  pre-paid sticker or tags, others enter these
 extra units into the  billing system off  of route books, and the total calculated bills
 must reflect these extras  (Bellevue, Washington).  Other jurisdictions vary the level of
 the bill based on how far the cans of waste are left from the curb (Tacoma,
 Washington).  These requirements can add up to a fairiy complex system, with
 significant computer hardware, software, and staffing needs.
Configuration Alternatives for a Bag/Tag System:

Bag systems are used in a number of jurisdictions, and are being considered by
many others.  Some jurisdictions have reported that the changeover to a bag
system resulted in initial questions and complaints from customers, but that the
potential for savings seemed to win customers over.  In fact, a survey in  Perkasie,
Pennsylvania, found that 93% of the customers wanted to retain the system.12
    10 Part III discusses the calculation of rates in detail.

    11 The configuration of rates for multi-family customers is discussed separately m
section 5.0.

    12 However, even with a bag system, customers are never perfectly happy. Some
jurisdictions have offered two sizes of bags (twenty and forty gallon sizes), but others
have  reported that customers who did not have much waste cut their bags into tour
pieces and sewed the edges together to put out waste in smaller quarter-bags.  One
jurisdiction reports that customers have used many methods to reduce the number of
bags  they need to use, from stomping the waste, purchasing trash compactors, and
even  driving over the bags with their cars to compress the waste.

                                     II. 23

 The bag system is configured in different ways in different jurisdictions.  In High
-Bridge, New Jersey, 52 bags are delivered once the basic annual fee is paid, and
 extra bags can be purchased as needed.  Perkasie, Pennsylvania makes'two sizes
 of bags available for its customers at different prices.  In Woodstock. Illinois, the
 town gives the alternatives of either a bag system or a system in which customers
 rent the cans.

 Structure of Rates: Some jurisdictions include ail system costs in the price of the
 bag, and others charge using a two-part system.  The price of the  bags could
 reflect the total average cost of providing the  solid waste collection service, including
 the fixed cost of providing service.  Alternatively, the jurisdiction could charge for
 service in two parts.  A customer charge could be assessed to customers to cover
 the fixed costs of  providing service, or those costs that do not vary with the amount
 of waste collected. This would be all or part of costs  such  as administration and
 overhead, '"ie billing system, and getting trucks on the street  The price associated
 with the bags or tags could then include the variable costs  of providing the service.
 The variable  costs, or those that vary with the amount of waste collected, would
 include such things as transfer, hauling,  and disposal.  The  rates for the extra
 service levels could be based on cost of service, or could be modified based  on
 policy considerations.19

 Of course, there is a range of choices in how the jurisdiction chooses to structure
the rates between these alternatives.  The jurisdiction may select how much of the
fixed costs it wishes to include in the price of the  bags based on choices regarding
the tradeoffs in the level of incentive vs.  revenue and other  risks.14
All bags must generally be sold for the same  price - it would be very difficult to
 implement a  system in which the bags were different prices based  on the number
put out by a particular customer. There can be no variation in price based on
whether it is  the third vs. the fourth bag of service the customer puts out in a
particular week. Of course, different sizes may be sold for  different prices, and
special bags for low income, backyard service, and  other options may be made
available.  Enhancements of bag/tag systems would be the  introduction of special
smaller bags that  may be available for a smaller fee, or different colored tags  for
smaller bundles.  This would provide enhanced recycling and waste reduction
incentives for customers, offering savings for disposing of smaller volumes of  waste.
    19 These choices involve some tradeoffs in terms of revenue security. Section 3.2
and Part III address these cost of service and  policy/incentive issues in more detail.

    14 These tradeoffs and the methods of calculating rates are addressed more fully
in Part III, •Conducting a Rates AnaJyso".


 Bffing:  If the full cost of providing service is included in the price of the bags, then
 no billing system is needed.  If some level of separate customer charge is
 employed, it may be billed in several ways.  In fact, if a jurisdiction is currently
 funding solid waste services through a tax or fixed-fee method, the traditional
 method of funding can be continued for the customer charge portion of the fees.
 The customer charge could be billed through a monthly (or periodic) fixed bill sent
 to the customer, or could be billed through the property tax or other tax method.
Choice of Baos/TaQS/Stickers:

The choice of whether the pre-paid system selected uses bags, tags, or stickers
generally depends on:

         1)  cost time,  and complexity of obtaining the bags/tags;
         2)  whether the jurisdiction wants to avoid encouraging plastics in the
         3)  which system  is easiest from an inventory and distribution point of  view;
         4)  the amount of in-field enforcement the jurisdiction can handle because
            a tag or sticker system will require setting limits on the size of waste
            that can be picked up for the price of one tag or sticker; and
         5)  jurisdictional preference or preference of any agencies that might be
            distributing the bag/tag/stickers for the jurisdiction.

There may be some preference for tags or stickers over pre-paid bags because
bags require more storage space, and bags may not be the appropriate size for
odd-size 1 or shaped items.  To get around this latter problem, some jurisdictions
allow th*» bags to be taped to the odd-shaped tern. If stickers or tags are used, it
will be necessary to establish and advertise limits on the size of waste that will be
collected. Another potential problem of a bag/tag system, the problem of animals
scattering the waste or health regulations that prohibit food waste from plastic bags,
can be handled  if customers put the bags inside standard garbage cans.

It is not dear whether the system is more convenient or less convenient for a
customer than a variable can system.  In some areas, the jurisdiction provides a
number of bags upon payment of the annual fee.  In areas where customers are
responsible for purchasing  the bags, and may find they are out of bags on a
    15 It should be noted that even if a bag system is not used, the vast majority of
customers putting out extras under a tag system will be attaching the tags/stickers to
plastic bags they have purchased.

                                     II. 25

 collection day. This inconvenience can be reduced if a number of outlets for the
 sale of bags can be developed.  If the bags are available through the solid waste
 agency, over the phone, and through a variety of retail outlets, customer
 inconvenience will be greatly reduced. The more the solid waste agency relies on
 retail outlets for distribution,16 the lower the inventory that the jurisdiction will need to
 maintain, and the lower the customer staffing needs at the agency.
 Both bag/tag and variable can systems are feasible and proven methods of
 implementing a variable rates  system.  Both integrate well with waste reduction and
 recycling objectives.  In order to work most effectively and be fairest to customer,
 both should be implemented as a mandatory option - ail  customers should be
 required to participate in the system.17

 Advanced  billing  is possible under either a variable can or a bag/tag system.  Some
 services bill in advance for the use of its service (e.g., cable television, local
 telephone service). In some cases, a jurisdiction may wish to charge in advance for
 basic solid waste service. This may provide several  advantages. Advanced billing
 may be used as  a method of raising funds for initially setting up a variable rate
 system.  Having customers pay for service a month  before it is provided allows the
 jurisdiction to borrow the capital from its customers.   Advanced billing may also
 provide a method to reduce the level of unpaid bite.1*  This is very straightforward
    16 Note that a financial •convnission' on the sales may be required.

    17 To be more precise,  customers should be required to pay  into the system,
whether or not they actually use the service. Al customers benefit from having a solid
waste system in the city.  They al benefit from having a dean, healthy environment, and
a system that assures the wast* is treated property. If al benefit, al should pay toward
the costs of the system,  tf the system is not mandatory, it also becomes difficult to
determine how many customers wifl participate, the fbced costs of the system would be
borne by too tow customers, and customers would have an greater incentive to •cheat"
by putting waste in other's cans or other ways around the system.

    11 Note that in Seattle, Washington, unpaid solid waste bias are virtually unknown.
This is for two reasons.  First the solid waste service is bided in advance, so customers
that move nave already paid  their  bet   Second, the  sold waste  bi as  part of a
combined bi with water and sewer service, and by ordnance, if • partial payment is
received, the solid waste portion is paid first  Thfc has tne effect of assuring that any
unpaid balances would alow the  City to shut off the water service, the  last portion  of
the bi that payments are  applied to.  Although the City may also put a lien on the


to implement under a variable can system (customers are billed one month in
advance for their subscribed level of service).  Advanced billing is also easy to
implement if a customer charge is employed for the bag/tag system.  However,
advanced billing cannot generally be implemented in the bag/tag option  if the full
cost of service is reflected in the price of bags.

Both systems are imperfect mechanisms for charging based on the level of service
used.  Customers have incentives to stomp or otherwise condense the volume of
their waste.  The ability of customers to be able to pervert the relationship between
the unit of revenue (the can or bag) and the unit of cost (if the system is partially
dependent on a weight or tonnage fee) can complicate forecasting in the
determination of rates and service usage.  However, both are practical systems that
are currently in use in a number of jurisdictions.

Tables 2-1 and 2-2 in Part V, Case Studies, list a number of jurisdictions nationwide
that employ  either a bag/tag/sticker system, or  a variable can system. The tables
are extremely useful, and give background information on the jurisdiction as well as
how its rates and programs are configured. Some of the comparative information in
the table may assist a jurisdiction in determining the feasibility of such a system in
its area.19 However, based on the analysis and discussions in this document, there
are several conclusions that can be made.
Bag/tag systems have a number of advantages:

  o      Customers pay on the basis of the amount of service used, not on the
         basis of the variable can system's "average" or "subscribed" service level.
         If the customer puts out less waste in a particular week, the customer will
         pay less in the amount of bags they had to purchase to contain that waste.
         With a subscribed system, no  change in the bill would be realized.  Bag
         systems are more responsive to weekly changes in the amount of waste
         disposal service needed.  The system is very flexible for customers.
  o      Bag systems can more easily be configured to allow smaller increments of
property for unpaid solid waste bills,  the water  shut  off option is a  very  effective
inducement for customers to pay their bills.

    19 The source for Tables 2-1 and 2-2 is "The Effects of Weight- or Volume-Based
Pricing on Solid Waste Management", Draft Report, January 1990. Research Triangle
Institute, Research  Triangle Park,  North Carolina, prepared  for  U.S.  Environmental
Protection Agency.  The authors gratefully acknowledge the RTl and EPA for use of the

                                     II. 27

         waste, so it can provide better rewards for customers with low levels of
         waste disposal needs.  Carrying a large inventory of can sizes for a
         variable can system is much more complicated.
  o      A bag/tag option does  not generally require complicated billing systems,
         which can be a barrier  to small and medium jurisdictions. A variable can
         system requires a billing system that can calculate bills on the basis of
         selected service level for each customer in the system.  Some of these
         costs can be mitigated  if the jurisdiction can bill for solid waste collection
         jointly with other utility services like electricity or water.
  o      Bag/tag systems are fairly easy and fast to implement20
  o      Bag/tag systems are understandable to customers.
  o      Distribution of bags can usually be arranged in a fairly convenient manner.
         Under a variable can system, cans may be supplied by customers.
         However, if the jurisdiction opts for semi-automated systems, the jurisdiction
         must maintain an inventory of cans (often in a variety of sizes), and must
         detiver and re-deliver cans to customers.  The variable can alternative can
         be a fairly costly and complex alternative.   However, the bags/tags must be
         easily available or customers may be frustrated or may turn to illegal
         dumping if they dont have bags when they need them.
  o      Bag  systems allow some of the most efficient collection.  Some jurisdictions
         nave realized about 1,000 collections per route,  compared to 600-800 per
         route for curbside variable can systems.
  o      There is no need for enforcement for customers putting out more waste
         than  they have paid for. A variable  can system requires separate
         implementation of a system that allows customers to dispose of occasional
         extra waste above their service level.  Under a bag/tag system, a difficulty
         arises when unpaid bags are put out for collection, but this is not a greater
         problem under this alternative than any other volume-based system.
  o      Customer service burden is lower than with a variable can  system,
         especially if the bags are available through retail outlets.
The advantages of a variable can system include:

  o      These systems have been proven to operate effectively In fairly large
  o      Enforcement of service levels may be unnecessary, or can be greatiy
         simpflfled with the issuing of official toters, so extras can easily be
    * Perkasie. Pennsylvania studied and implemented their bag system within a period
of about 9 months.


 ,0      Revenues are fairly stable once the system is in place.  Customers tend
         not to change their service level often because of the inconvenience.  Short
         term  revenue variations and differences from projections should be
         expected when a new variable rate system is just being implemented
         (variable cans or bag/tag).  One method of reducing this problem would be
         to allow a phase-in period during which shortfalls may be covered by
         another city fund.
  o      Rates can easily be set to make certain that the fixed cost of the solid
         waste system is always covered.  There is effectively a minimum level of
         service associated with each collection, so customers are always paying for
         some level of service.  If the bag/tag system is set up so there is  no
         customer charge, then the jurisdiction runs the risk of not covering the
         fixed  costs of the system. This is potentially a serious  problem. If the
         bag/tag system is set up with a customer charge, then at least some
         portion of the fixed cost is assured.  Otherwise  a fall-back revenue source
         may be needed until the system becomes stable  and more predictable.
  o      Under a variable can  system the  rates may be set so that there are
         increasing or decreasing differentials between service levels.  With a bag
         system it is difficult to charge different prices for extra bags.  Very limited
         variation in the price of bags would be realized if the bags are provided
         from  two sources - issues bags for a basic level of service with payment
         of a customer charge, and additional  bags that cost a  different average
         amount Unlike under a variable  can  system, a bag system will not allow
         customers that use a great  deal of service to be charged punitive rates for
         those extra service teveis.


Bag/tag systems are being considered and implemented in a variety of small to
medium jurisdictions.  This system is fair and charges customers based on the
amount of service used, provides excellent waste reduction and recycling incentives,
is fairly easy to implement and explain, and does not require a complex system.
However, the ultimate selection of one of these systems  requires an assessment of
the tradeoffs given the circumstances of the jurisdiction.  Each system has its
advantages and both will integrate well with waste  reduction goals and recycling
    21 However, as discussed in Part I on feasibility, neither system may make sense
from a cost-effectiveness basis if the true short-term and long-term costs of solid waste
disposal are very low.


Once a volume-based system is selected, a number of additional issues may need
to be decided. The pricing increments between different service levels may or may
not be the same.  Rate design policies may lead to selection of rates with
decreasing (declining block), constant, or increasing (inverted block) differentials
between additional service levels.  In addition, a series of rate options and system
enhancements will be discussed in this section:  charges for extra waste; options for
backyard vs. mandatory curbside collection; options for special low service levels
(e.g., half-can and zero can options);  bi-weekly pickup; charges or credits for
recycling or other waste diversion  programs; options for  billing for multi-family
customers; and compacted dumpster and variable can rate  options.
                  3^1  tf HfcN^I^SS OF THE RATE SIHUCTURE


The level of the price differentials between service levels (either bags, tags, or cans),
may be based on a  cost-of-service evaluation or may be priced at a different level
for policy reasons.  The level of these differentials must be selected by the


Variable can rates have at least two components:  the customer charge, and the
extra amount that must be paid for additional levels of service. In a bag/tag system,
the bags may be priced to include the customer charge or not Under either
system it holds that  generally, the greater the difference in the amount that must be
paid for additional service levels, the greater the incentive for customers to reduce
the amount of waste that is disposed.

However, the nature of the costs for collection of solid waste tend to consist of a
high amount of costs related to providing ssmft tovsJ  of service (hiring trucks and
staff to stop at the residence, and having sufficient capital facilities, etc.).  The level
of the  extra costs incurred in picking up an extra can or bag of waste at a  particular
residence along the  collection routs is mostly the tipping fee and the extra hauling
charges. These costs are gsnsrallv fairly low compared to the fixed costs of the
system.  That is,  because solid waste collection and disposal generally involves a
fairly high level of up-front system costs compared to the extra costs associated with
picking up  one extra bag, the costs of the system generally decline with eacr.


 additional unit collected.  This implies that rates for increments that are established
 based on cost of service would generally be lower for additional service levels.
 However, the jurisdiction may wish to provide stronger motivations for customers to
 reduce waste.

 This cost structure is comparable to  the cost of service in electricity and water
 utilities.  However, these utilities have generally departed from strict cost of service
 rates to provide higher rates for those high levels of service.  This has proved to
 provide a strong conservation incentive.  Similar policies have been invoked  in some
 solid waste jurisdictions to try to enhance waste reduction and recycling incentives
 and to be more consistent with the longer run costs of running a solid waste

 Determining cost of service is somewhat of an art, and there is no one set of
 numbers that represent cost of service rates. Rather,  there is a degree of discretion
 in whether cost components are assigned on the basis of households, customer
 charges, or "tonnage" (or volume) charges.  Alternative assignments will result in
 different  "cost  of service rates".  By assigning more (or fewer) cost components to
 the tonnage" or variable portion of the rates, the jurisdiction can develop cost of
 service rates that provide higher (or  lower) incentives for waste reduction and

 Deviating from  cost of service to increase the rates charged for additional service
 levels leads to  some revenue complications.  Because the jurisdiction will not want to
 recover more than the  revenue requirements plus some fair return, increasing the
 amount charged for the variable portion may tend to lead to "subsidized" rates for
 the lower service levels. However, the forecasts of how customers will react to these
 rate incentives  may not be accurate.  If the incentives to reduce the amount of
 service customers use  are more effective than foreseen, the risk that the system may
 not recover fixed system costs increases.

 Generally, jurisdictions are allowed to charge rates that are reasonable, and most
tend to use cost of service as a benchmark for reasonable rates.  Cost of service
 rates offer the advantage that they tend to lower the risks of not covering the fixed
 cost portion of the revenue requirements.  In addition, rates that penalize higher
 levels of service wiH tend to encourage higher levels of illegal dumping.
    22 Note that as fewer costs are assigned to the variable component, the rates
become doser to purely fixed rates.  These concepts are discussed more fully  m Part
III, "Conducting a Rates Analysis".


Recyofno/waetB straani reductiQO ncentives
  p      Waste reduction/recycling incentives are increased as the rates for extra
         service are increased and as the rates for lower service levels are reduced.
  o      Increasing the waste reduction/recycling incentives wilt tend to lead to
         higher levels of illegal dumping.   Care must be taken that the rates are not
         priced so high that customers turn  to unwanted behavior.

Equity and Economic Efficiency
  o      Although generally cost of service rates would tend to lead to efficient use
         of resources, there are cases in which deviations are warranted.
         Sometimes these deviations are justified because of political or policy
         reasons.  In  th» case, it might be that the cost of service does not
         accurately reflect the long term marginal coat of providing the service (e.g.
         landfills are  underpriced).

Customer Service,  Rate Stabtty, and Acceptably
  o      Depending on the current structure of the rates and the levels of service
         used, customers may not readily accept an  aggressive rate structure. It
         may be that the jurisdiction will have to phase the rates in.
  o      Moving rates toward long run marginal cost will tend to increase the
         stability of the rates over time.
  o      Short-term rates wil tend to rise more rapidly for high levels of service.
  o      There may be more customer service complaints until customers become
         accustomed to the rates and the system.
        Once volume-based rates are implemented, there should not be additional
        effort to implement or maintain an aggressive rate structure.
        Aggressive rates may lead to a need for greater enforcement efforts.  High-
        use customers who face high bills may have an increased incentive to
        •sgaty dump waste or may look for other undesirable methods of reducing
        the waste they are charged for (like burning).
        Deviations from cost of service rates may increase the risk of under-
        recovering revenues.  This is because the recovery of some fixed system
        costs may be shifted  to rates for higher subscriptions.  • the rates  are
        more effective in reducing subscription levels trian projected the jurisdkaion
        runs a risk that fixed  costs of the system may not be futy recovered  in


         the short term, during the phase-in of a new system, it may be prudent to
         guarantee some of the fixed costs from other jurisdictional funds until the
         rates and customer reactions are in synch.


Because of the high fixed cost component in solid waste, a rate structure that
adheres to cost of service will  not generally  provide very strong recycling incentives,
because the rates for extra levels of service  will be relatively small.

However, there are strong reasons to believe that the variable costs than many
jurisdictions see are under-priced, especially given the difficulty of siting landfills  and
incinerators. The prices being charged often may not include a full accounting of
operational costs, but even more significantly, do  not reflect the out-of-pocket and
opportunity costs of meeting regulations, closure costs, capacity utilization, and
disposal  facility replacement  In addition, many jurisdictions will want to deviate  from
cost of service  to provide incentives that are strong enough to meet legislatively-
mandated recycling goals for the community. In general, it may be worth attempting
to structure  rates that provide more aggressive  recycling incentives than strict cost
of service would dictate.

The jurisdiction should be aware that deviating from cost of service involves some
risk of not covering revenue requirements.  The risk involved depends on the
accuracy of predicting the amount of waste  that will be disposed by customers  (and
therefore the costs) vs. the prediction of the number of cans that will be subscribed
or bags/tags that will  be purchased (the  unit of revenues).

However, along with providing incentives for recycling, designing rates so that the
costs for additional service  levels is  high will also  encourage customers to avoid
paying those higher rates through unwanted behavior like  illegal dumping.  The rates
should be designed carefully - high enough to make customers aware that they can
save money by reducing waste, but not so high as to encourage illegal dumping.

In general, a rate structure  that provides strong recycling incentives should give
customers a better idea of  the longer term system costs, and may provide for a
more stable system.

                         3.2  CHARGES FOR "EXTRAS"


 Under a variable can system, if customers use more than their subscribed level of
 service in a given period, the extra service should be reflected in their payment for
 service.  What is a good approach for accomplishing this?


 Undar a variable can system, the customer's bill is based on a subscribed level of
 service.  If a customer  has occasional levels of excess waste, there should be a
 convenient and legal method for customers to be able to have that waste removed.
 Two possible methods are discussed in this section:

         1) A prepaid system  (bag. tag, or sticker), or
         2) Charges for extra units on the customer's bill.23

 The way in which the variable can system is implemented will affect the complexity
 of charging for extras.  Under one option, the jurisdiction may supply variable can
 customers with official "toters" in different  sizes (e.g.. 30,  60, and 90 gallon toters).
 These garbage carts would be  sized to tha major subscription levels, and customers
 would be supplied with the toter appropriate to  their subscription level.  Any units of
 waste outside that container can than easily ba  identified by collection staff as
 "extras".24  Under a system in which customers  use their own cana, an honor system
 may be used, where the collectors assume that any waste not in normal cans is
 extra.  A third option is to have tha collectors refer to route books that identify the
 units  of paid waste.
    a Tha diacuaaion la relevant for a variable can system.   Undar a bag or tag
system, tha customer pays  baaed on tha amount of service used rather  than  a
subscribed level There la no need to determine an optimal method of charging for
extras under a bag/tag system.  However, for a juriscfictton that chooses to employ a
system wth a fixed fee for basic service and wants to charge tor waste above that
basic ievei. this may ba a relevant discussion.
    * kjeaiy, you would prefer tha official toters ba unique enough that  customers
cannot purchase look-alike toters and put them out on tna curb with the paid waste.
Alternativaly, tna official toters may ba brandad or identified In soma way that makes
them  "offitiaT. This would make tna identification of 'extras* beyond paid waste  more
                                     II. 34


 Under a system in which the jurisdiction would bill for extra waste, the collection staff
 would keep track of the customers who leave more waste than the subscription level
 and transfer the information to the billing agent  With the bag/tag option, customers
 would purchase bags or tags from the solid waste jurisdiction or agents and use
 them  for extra waste they  want picked up.  The choice of whether the pre-paid
 system selected uses bags, tags, or stickers was discussed in Section 2.3.

 To  assure a reasonable level of customer service staffing needs, billing practices
 associated with variable can rate systems generally  allow customers to change
 subscribed service levels only  a limited number of times per year (usually once or
 twice  per year).  However, even if customers could  change service levels monthly,
 there  will be occasions when their subscribed level will not be adequate (parties,
 spring cleaning, etc.)  A bag/tag system can give customers who need occasional
 increases in their pickup service a legal and convenient method of obtaining that

 The bags would generally be priced higher than the fee for additional units of
 subscription service.  Because each  bag represents only one pick-up, and a
 subscribed can rate generally represents four pick-ups per month, the bags should
 be  priced at a rate  higher than one-fourth of the monthly rate for an  additional can.
 This encourages appropriate subscription levels, leading to more predictable
 revenues.  The bag/tag approach would  require some enforcement efforts to be
 sure unpaid waste is not collected.

 Under either the bag/tag approach or an approach  in which customers are billed for
 their extras, collection staff will need to enforce the  legal limits on the size of an

 The discussions of the two options, pre-paid bag/tag  vs. billing  for counted extras,
follows.  This discussion '» most applicable to  jurisdictions selecting a variable can
 system.  However, it may  also apply to those jurisdictions maintaining a system mat
 charges a fixed charge for a basic (but limited) level of service but wants to provide
a more flexible system to  customers.

 Recycfng and Waste Stream deduction Incentives
         o  Both:  Recycling  incentives are enhanced when customers are charged
            for extra garbage that  they generate.
         o  Both:  Charging for pickup  of extras (through either bags or the billing
            system) will tend  to increase incentives for illegal dumping.
         o  Under a bag/tag  system or an "extras" program that is  not well


            advertised, illegal dumping may become a bigger problem.  Incentives
            exist to dump illegally if customers are not fully aware of the bag/tag
            program, do not have easy access to bags, or if charges for extras are
            very high.

Equity and Efficiency
        o  Both: Charging for extras via some method is important for equity
            considerations.  Customers receiving more service should pay more.
        o  Bag/tag systems provide immediate and direct feedback to customers
            on cost and  service use.  Billing for extras  can delay charges for
            service (feedback) several  months following actual use. The longer
            the time lag between services used and services billed, the less
            effective the.price incentive becomes. Thus, a bag/tag  system may be
            more effective in providing waste reduction incentives.
        o  Bag/tag systems:  Using bag/tags implies that each additional "extra" is
            charged at the same rate.  If rates for additional cans are increasing or
            decreasing, a bag system cannot echo that rate structure (although
            billing theoretically could).

Customer Service/Rate Stabety/Acceptabity
        o  Both: Customer service is improved because charging for extras
            implies that customers can get collection equal to whatever service level
            they require each week. The system becomes closer to a usage-
            based system.
        o  Bag/tag systems are fairly easy to understand.  However, charging for
            extras via bags/tags win cause some customer complaints until the
            program  and its purpose become wefl known Customers may not
            understand why their garbage isn't being picked up, may not like
            having to make the effort to obtain bags when they just want their
            garbage  picked up, and may not think it is fair, when they don't always
            fi  up the* subscribed garbage cans every week.
        o  A bag/lag system is inconvenient to customers because they must
            make sure to nave bags or tags on hand when needed.
        o  Bfflng:  Charging for extras on the bi may cause additional disputes
            with customers. This is particularly true since the customer does not
            participate in assigning the charges and may not remember usage that
                 red  several months prior to the bi.  Under advanced billing, the
            issues wi be confused by the pre-bi and post-bi inconsistenoes that
            would arise.
            BMng:  It may be cfifficuU for collection staff to identify which house the
            extra bag should be billed to in cut-de-sacs and alleys.  This may lead
            to customer complaints.  Identification is not as big a problem if a
            prepaid bag/tag system is used.


        o   Both: An incentive may need to be provided to collection staff to only
            pick up  paid garbage.  This can help in improving equity and
            reinforcing recycling incentives.  Some revenue sharing arrangement
            could be arranged.
        o   Billing:  The billing system would likely require some programming
            changes to incorporate billing for extras.  More complicated
            specifications would be required for an alternate billing agent.
        o   Billing:  Information on extras would need to be identified, counted,
            recorded, and information transferred from collection staff to the  billing
        o   Billing:  Customer service staff will need to deal with customer disputes
            about the number of extras billed.  This is even more  complicated if
            billing is less frequently than monthly.  In this case, customers will have
            received bills that include charges for extras that are several months
        o   Billing:  If the jurisdiction bills for solid waste in advance (and bi-
            monthly  or quarterly), the bills would become complicated,  mixing pre-
            paid subscription service with several months of after-the-fact additional
            units of  service.  Customers could easily become  confused.
            Reconciling customer complaints may be more complicated.
        o   Billing:  Identifying which  household has put out the extra units to be
            billed is  not straightforward in alleys and cul-de-sacs.  (This would not
            be a problem under a pre-paid bag/tag system).
        o   Billing:  Keeping track of additional units picked up would require
            collection staff to keep weekly, detailed route books, and regularly
            transfer  the information on extras to the billing system.
        o   Billing:  The system would require extra work by collection  staff that
            may be  outside traditional job descriptions or contracts conditions.
        o   Bag/tag  system: Sales of bags/tags would need  to be handled  by
            either the city, billing agent, contractors, or elsewhere. In addition,
            auditing, funds transfer, and other systems will need to be  set up. The
            volume of sales may provide an incentive to try to get retail outlets to
            handle the sales. This would also increase customer  convenience.
        o   Bag/tag  system: The bag/tag system would need to  be integrated into
            any existing contractual and billing arrangements.
        o   Bag/tag  system: If the bag/lag system is  set up  to allow customers to
            order bags through the billing agent and have their account billed,
            customer service representative (CSR) staff workload  would increase.
            First orders would need to be processed.  Second, if the  orders
            cannot be identified dearly on the bill, CSRs may have to explain the
            source of these charges  to customers calling for  clarification.  More


             detail may be available if alternate billing systems are used.
         o   Billing:  Extra work would be required of collection staff for "billed
             extras*.  In addition, given the time lag between usage and billing,
             customers may be more likety to question the billed charges and the
             solid waste agency may need to set up procedures to substantiate the
         o   A bag/tag system would be relatively easy to enforce.  It would not
             require collection staff to note the extras to be transferred to the billing
             system.  Rather, extras  would be easily identified as waste outside the
             totem or customer cans.  Staff could recognize when extras are put out
             and not pick up unpaid, unlabelled extras.

Revenue Coraderabons
         o   Both:  Charging for extras has positive effects on revenues, and helps
             cover the cost of disposal when customers exceed normal subscription
             volumes.  However, charges for extras need to be set so that collecting
             one extra per week is more expensive than subscribing for one
             additional can.  That way customers do not substitute for higher
             subscription levels and  hurt the continuity of the subscription revenue
             stream, and the increased administrative costs are covered.


There are several reasons to maintain some method of charging for extras.  A fully
developed program for charging for  extras would give the customers a de facto
method of changing service level weekly (for jurisdictions on the variable can
system).  "Customer service" is improved.  Further, equity is improved because
customers receiving more service pay more.

Generaly, prepaid bags or tags are  the preferred options for charging for 'extras'.
This is partially dependant on whether collection and biHng is performed by the
same agent,  and the complexity of transmitting information into the billing system.*
However, being for "extras11 has been found to be practical in many parts of the
country, tapatialy in areas where private haulers handle collection, billing, and
customer service functions.
    28 One nctHJrirnportant weakness of the  sticker system  is  that the data  for
improving forecasts of the  amount of service used by customers is not available.
Overall forecasts are not affected.


 Sag/tag systems may prove superior to billing in enhancing recycling efforts.  First,
 customers must work harder to obtain  bags, and time and effort is an additional
 non-price incentive to reduce waste.  Second,  a more immediate price incentive for
 recycling is experienced because the delay in receiving bills for the extra service is
 avoided.  The customer is aware of the extra payment as s/he uses the special bag
 or applies the tag.  Third, disputes over bills are reduced. Identification of the
 household to which the extra belongs is not necessary if the waste is prepaid. The
 need to recall the numbers of extras put out months ago is eliminated.

 Integrating the "extras" count into the billing system reduces the inconveniences for
 customers, but requires much more work on the part of collection staff to count,
 record, and transfer data on extras counts to the billing system.

 If an option of standardized "toters"  is used, the problem of identifying extras is
 made simpler.  However, the bag/tag system (or other methods of charging for
 extras) will need to be advertised more to make customers aware of their existence,
 and to inform customers that unlabeled, unpaid extras will not be collected.  Under
 either system, revenue sharing with the collection contractor may need to be
 instituted to provide an incentive only to pick up paid garbage.  The incentive should
 be  based on the number of bags or tags sold or the number of billed extras.  To
 improve customer service, the bag/tag  system should be enhanced to allow
 customers to order  bags or tags by telephone and have the charges appear on
 their bill, or to purchase pre-paid bags or tags at local retail outlets.


Many jurisdictions are considering switching to curbside collection of solid waste.  A
jurisdiction can either make a type of service mandatory or offer the customers the
choice of curb or backyard collection and charge different rates for pickup to reflect
the cost of service differences.


Jurisdictions considering changes in collection service have several basic options:

         1)  mandatory curbside pickup;
         2)  offering either backyard or curb collection service for similar fees;
         3)  offering backyard service  only; or

                                     II. 39

         4)  offering both services, with an additional fee for backyard service (or
             equivalentty. offering a credit for curbside pickup).9

 Many communities have curbside pickup service with additional charges for non-
 curbside service.  Some areas charge differentials in the form of flat fees, and some
 have used more complicated forms for charges.  In particular, some areas charge
 an additional fee per distance (often increments of 25 feet from curb) per can.
 Curbside pickup provides an opportunity for significant savings to the jurisdiction
 (estimates  range about 20% of collection costs).  Jurisdictions that offer both types
 of collection but charge a premium rate for backyard service have found that the
 vast majority of the customers select curbside service.27

 In some areas, curb service may be politically unpalatable because of the
 unattractiveness of the streets with waste on the curb. This may be an especially
 big problem in areas with private collection,  with multiple pickup days in a single
 neighborhood.  In some jurisdictions, collection contractors or the jurisdiction supply
 wheeled totem of appropriate size (based on service level) to make it more
 convenient for customers to deliver their wastes to the curb.2* In addition, the use
 of toters allows the use of mechanized collection  procedures, with resulting cost


 If a voluntary curbside collection system is chosen, the rate structure should allow
 for a rate differential for backyard vs. curbside  pickup.  The different options range
 from a simple flat charge for backyard service to an additional per can fee based on
    28 Of course, the consideration of the second option requires the jurisdictcn to be
able to work out contracts or agreements to have both types of service proviced, and
have the jurisdiction's customers realize the savings.

    27 The premium that jurisdictions charge ranges from about 10% more to four times
as  much as curbaida service, with most  charging  a 40-100%  premium.   However.
regardless of the soe of the  premium, the number of customers selecting curbside
service is above 85%, and usually falls in the 90%-and-above range. The jurisdiction
charging 400% more shows wall  less than 1% selecting backyard  service.   Seattle,
which chargaa 40% mora, has about 3% of customers paying for backyard service and
about  3%  of customers  qualifying for  exemptions for  the premium service at no
additional charge due to age or terrain.

    * In addition, uniform-looking totors may make the street took less unattractive than
a mtsfMTiash of privataiy-suppiied  garbage containers for jurisdictions opting for curb


 the distance the cans are from the curb. This charge may be integrated into the
 fixed charge for some systems, or may  be an amount that varies based on the
 subscription level.

 The more complicated variations (including factors for distance from the curb, etc.)
 will generally require a large amount of reprogramming of the billing system and
 relatively high data collection requirements (which customers leave their waste how
 far away, etc.).   Implementation of more sophisticated differentials might need to be
 explored because of improved equity and customer service.   However, the
 complexities of the rate structures would need to be weighed against the concern
 for not overcomplicating the rate structure so much that it becomes unwieldy for
 customers  or the jurisdiction.

 The form and level of the charge may not be able to be priced completely fairty, at
 least in the short run. Charges for cans bv  distance may be difficult to handle
 administratively, although they are in use in several jurisdictions.   A flat rate
 differential,  especially if it is based  on average cost of backyard pickup, would
 provide incentives for customers with higher service levels to opt for backyard
 service, reducing the jurisdiction's savings.  Customers with low service levels would
 tend to deliver  to curbside to avoid the  extra charge, but customers with higher
 volumes of waste for collection would be relatively more willing to pay the  extra and
 continue with backyard.  The costs would not be adequately reflected.  A  differential
 that increases with the number of cans would more closely approximate the cost of
 providing the service, although still not  account for differences based on distance.

 The following discussions assume that the premium charge for backyard service
 varies with  the  number of cans subscribed or the number of bags/tags used.29  The
 discussion  focuses on whether a mandatory curbside system should be invoked, or
 whether a voluntary system with additional charges for backyard service should be

 ^^a» a^ ««J^*.«« /I J/ria^n ^S^h^A .^^f^^^ B^^^Mb^^& M»^»
         o   Both:  Curbside garbage collection integrates well with the curbside
            recycling programs, and may produce an incentive to keep garbage
            production as low as possible so customers may have to deliver the
            smallest number of containers to the curb.
    29 Note that with a bag or sticker system,  specially-colored (and higher-priced)
bags or tags could easily be provided for backyard service. Since each backyard bag
would cost  more,  this option is parallel to  a higher  cost for each backyard can  of
service.  For simplicity, the discussions below will focus on a variable can system, but
the backyard bag system is an equivalent option.


         o   Both:  There are no obvious effects on illegal dumping incentives.

 Equity and Economic Efficiency
         o   Both:  Under both options, customers receiving similar service will pay
             similar amounts.
         o   Both:  Low income customers can still receive a credit whichever type
             of service is implemented.
         o   Voluntary:  Under a voluntary backyard system, differential charges for
             backyard vs. curbside pickup will allow the jurisdiction to approximate
             the difference in cost of service.  Charges related to number of cans
             allow a doser approximation than fixed differentials.
         o   Mandatory: An exemption for elderly or irifirm/handicapped individuals
             may need  to be arranged, as well as possibly for customers whose
             property makes curbside collection impossible (e.g. due to slope). A
             mechanism for customers to request this exemption would need to be
             developed. Then these customers would need to be certified,  and
             noted in the billing system so their specialized system would be
             available for the route books.  The jurisdiction (or another agency)
             would need to determine eligibility requirements and  certify these
             customers, and keep up when  customers move.  This could be a major
             effort  Under voluntary curbside service, these customers could simply
             opt for the backyard service.30

 Customer Service/Rate SfcabAy/Acoaptabity
         o   Both:  Both systems can help keep system costs down, in that both
             involve a move toward curbside service.  Mandatory curbside,  in
             reducing collection  costs, should help keep rate increases down.
             Voluntary curbside with well-priced backyard  differentials can achieve
             similar results.
         o   Voluntary:  Voluntary curbside allows customers more choice in their
             service options.  This may be preferred by customers.
         o   Voluntary:  Rite differentials assure that customers wtfl pay their fair
             share of the cost of whatever service they select
         o   Mandatory: Mandatory curbside makes necessary special
             considerations for the infirm, elderly, and other exempt customers who
             cannot get totem to the curb.   Voluntary backyard service provides an
             option for these customers.
         o   Mandatory: If curbside service is mandatory, it may not be well-
             accepted by customers.
    30 The jurisdiction may, however, want to mitigate the cost for some low income
customers.  Low income options are discussed further in Section 4.0.


         o  Mandatory:  Mandatory curbside would require exemptions for infirm
            and customers with hilly terrain, increasing workload for certification,
            information transfer, and billing.  Identifying and certifying exempt
            customers is potentially a very major effort
         o  Mandatory:  Work for the customer service staff may be lower if
            customers are not allowed choices.
         o  Voluntary:  The billing system would need to identify which customers
            subscribe to curb vs. backyard service and calculate differential
            charges based on service type.  The jurisdiction will need to determine
            how and to  whom customers will supply information about their service
            choice and the information will need to be transferred to the billing
         o  Voluntary:  Even with a voluntary system, the jurisdictions may wish to
            exempt elderly or infirm customers or those with hilly terrain from the
            extra fee for backyard service.  This would require identifying  and
            certifying these customers in the billing system.
         o  Voluntary:  Customer service workload  may be increased because
            customers may have more questions, and customer records would
            need to be  updated  as customers change their service choice.

         o  Voluntary:  Collection staff may need to periodically monitor customers
            to determine if only customers who are paying for premium service are
            getting backyard collection.  This may require the use of route books.
            The amount of work  required will generally depend on the number of
            customers opting for backyard pickup.
            Mandatory:  A mandatory curbside system may help the jurisdiction
            realize a cost savings, with positive effects on meeting revenue
            requirements and financial stability.  However, even with backyard
            pickup, instituting an additional charge for backyard service allows the
            jurisdiction to cover the  increased cost of that service and still realize
            the cost savings.

• CgpcJusion/Recommendation:

 A program of voluntary curbside (optional backyard) service is generally preferred,
 provided it can be worked into existing labor or service contracts.31  The billing
 system would need to be modified to accommodate a differential between backyard
 and curbside service.  This alternative  provides better customer service, and gives
 customers the choice in desired service options.33

 Under a sticker or bag system, higher-priced, color-coded tags or bags can be
 used. However, this system cannot easily accommodate differentials in charges
 based on the distance from tha curb, unless a differential is provided in the
 customer charge.

 Tha price differential should increase for higher levels of service.  To maximize the
 effectiveness of tha system and tha consequent system savings, tha (aval of the
 differential should meet or exceed tha  actual cost of service differential.

 The jurisdiction may want to provide exemptions for tha elderly, handicapped,  or
 customers with hilfy terrain. This might be a potentially complicated issue under
 mandatory  curbside service, and should not be a problem under a voluntary system
 (or may not be as overwhelming) because these customers may opt for backyard
 service.  The cost savings attributable  to mandatory curbside wifl still accrue to the
 jurisdiction  because tha customers with more expensive service will pay the
 differential to tha jurisdiction in tha form of premium rates.33
     31 Provided tha contracts can be worked out so that tha jurisdiction  realizes the
 savings from tha mostiy-curbskJe system that win likely result

     92 To aaaa irnpternentation under a variable can system in which an "official toter"
 system is to be  used, tha curbside totars  might be dafivarad to all customers in a
 phasad-in approach around tha town.  Those customers wishing to receive backyard
 service (ganaraJly laaa than 10%) couid than arranga to hava totars removed with the
 understanding  that their service wffl  be at a higher rate.   Backyard  service would
 generally not use totars because totars cannot be dumped into "pack cans' for efficient
 carry-out sarvica.  Customers on backyard service would use standard garbage cans
 that can be dumped by collection staff into tha pack cans.  A phased-in  approach
 assures that thara wi not be an excess inventory of 10% extra  cans.

     93 Whan Seattle offered an exemption for customers that were physically unable to
 gat tha waste to  tha curb, it allowed  customers to obtain tha exemption immediately,
 and tha  Utility checked qualification in a phasad approach.  This haloed  stabilize  the
 workload, and reduced customer complaints.

                                      II. 44

                        ZERO CAN/HALF-CAN OPTIONS

In order to increase recycling incentives, a jurisdiction may wish to introduce special
low volume service levels. Does offering an option for a "zero-can" level of service
make sense?  Should a half-can option be  introduced?

Variable can rate designs can be structured to allow for a zero can level of service if
customers generate no waste.  Under this option, the customer pays a zero or a
reduced rate (possibly the level of the fixed cost of the system), and  no collection
service is provided to the residence.  Generally, to be fair to other customers, these
"zero service" customers are not allowed to substitute for  service by using the
transfer stations, using neighbor's garbage cans, etc.  They must be  certified by the
jurisdiction, and would be monitored relatively often.34  These customers represent
the ultimate in waste stream reduction. They meet the criteria through a number of
methods, including recycling, composting, and selective buying.

In order to be responsive to customers with low levels  of waste, but not be as
restrictive as a zero can rate, the jurisdiction may wish  to explore allowing a lower
service level than the single can rate.  This would reward customers who participate
in a great deal of waste reduction and recycling and who have modified their  buying
habits to reduce their garbage bills. Offering a half-can rate may be  a more realistic
option than the zero can rate, and provides additional incentives to recycle,
especially if coupled with curbskje recycling programs. The half can, or "super-
recyder rate" would be a more  practical level for more households to participate in,
broadening the appeal of serious recycling.36

There are several options for pricing these half-cans.  One option is to price strictly
according to cost of service.  However, because of the customer charge or fixed
portions of the collection charge, this may not be judged to offer enough of a price
    34 The City of Seattle had such a zero-can program from 1981-1988. Less than 1%
of the city's customers qualified for  the rate.

    38  For example, Seattle, Washington offers a "mini-can11 sized at 19 gallons, and
Olympia, Washington offers a 10-gallon service level.

                                     II. 45

 break.  Therefore, policy considerations may cause the jurisdiction to deviate from a
, strict cost of service mechanism for this service option.*  For example, to increase
 recycling incentives or to provide lifeline service, below-cost pricing may be

 This discussion is most applicable to jurisdictions with variable can rates.  Bag/tag
 system customers could presumably put out zero waste and pay only the fixed
 customer charge.  However, offering a special smaller bag may be an appropriate


 RecydnQ/Waste Stream Reduction
         o  Both options:  Provides increased waste stream  reduction incentives
             without favoring any particular methods (e.g., City vs.  non-City
             programs, recycling vs. selective buying, etc.)
         o  Zero can rate:  Offering a zero can rate could provide a very significant
             recycling and waste stream reduction incentive for customers who
             might realty be able to generate zero  waste.
         o  Half-can Rate:  Increasing service level options to include a half-can
             option should  increase recycling and waste stream reduction incentives
             for customers  currently at the one can service level.
 Equity and Economic Efficiency

         o  The zero can rate may not be equitable, as it is probably impossible to
             generate zero garbage (for example, toothpaste tubes are not
         o  Zero can customers benefit from the fact that they experience a deaner
             city than would be the case without the waste collection  system, but if
             a subsidized or zero rate is offered for this service, they  may not pay a
             fair amount for these benefits.
         o  If zero can customers use burning to get rid of their garbage, they are
             not paying for the social costs of their disposal methods (and in most
     * Set atoo the discussion in Section 3.1 of this paper on the steepness of the rate
structure, and Part IK on "Conducting a Rates Analysis'.

     37 For instance, Latrobe, Pennsylvania cites the example of the customer who cut
her standard bag into four pieces and sewed them into four quarter-sized bags in order
to realize a smaller service level that better reflected her needs, as well as a lower rate.


            places they are breaking the law).
         o  On the other hand, zero can customers are the model of what can be
            achieved in terms of waste stream  reduction.  If the service level can
            be achieved,  perhaps those customers who are willing to modify their
            behavior so significantly should be rewarded.
         o  If zero can customers pay less than the fixed costs of the system, it
            may be argued that they are being subsidized by other  customers.

         o  Half-can Rate: Increasing service level options so that customers' fees
            can more accurately reflect the service they require will increase rate

Customer Service/Rate Stabity/Acceptattfity
         o  Zero can rate:  The types of customers who might lobby for zero can
            service may be frustrated if they must pay for service they don't need.
         o  Zero can rate:  For customer service reasons, the jurisdiction may want
            to provide the maximum number of customer options for service  levels,
            and that may include a zero can rate.
         o  Half-can rate:  Increasing subscription options to include a half-can rate
            would probably meet with positive  customer response and will improve
            waste reduction incentives.
         o  The half can service  level increases subscription options for customers
            generating lower levels of waste  allowing them to save on their bill.

Impta I ** itatkxi/Maintenance

         o  Both Options: It should be very easy to introduce a half can rate
            and/or zero can rate once a variable can system is introduced into the
            billing system.
         o  Half Cans: If the variable can system is structured such that cans are
            provided by the jurisdiction, there may be some difficulties.  Currently,
            no small-sized toters are made.  However, to minimize enforcement
            problems  (judging  how fun is half full) special half-size cans would be
            necessary. Options  include requiring contractors to fill half of full-sized
            toters with a fixed barrier. Alternatively, some jurisdictions have found
            and supplied special small-sized toters. Although mechanized
            collection could not be employed and cans would  need to be emptied
            by hand, this may  not be a large problem.
            Zero can rate:  To be fair to customers who are not subsidized, the
            jurisdiction needs to monitor service level for zero can customers
            diligently, and enforcement costs could potentially be high for this class


             of customers, a hidden cost to the municipality.  Not providing this
             option would tower enforcement costs. If the households could be
             marked in some way, or if toters that looked like the official jurisdiction-
             supplied toters were unavailable in local stores, enforcement
             complications would be reduced.
         o   Half-Can rate:  if special  containers are provided, no additional
             enforcement beyond that normally provided would probably be
             necessary.  If no containers are provided, route books may be used for
             enforcement, or the jurisdiction may opt for an honor system.

 Revenue effects
         o   Zero can rate: Offering a zero can rate would tend to decrease
             revenues. Assuming the zero can customers decrease their waste
             production,  this revenue  decrease would be partially offset by cost
         o   Half-can rate:  The addition of a naff-can rate would also decrease
             revenues, assuming some customers signed up for this service level.
             The revenue reduction would likely be partially offset by a decrease in
             costs due to lower tonnage.


 Although a zero can option is a good model for maximizing waste reduction and
 recycling, it is probably not a realistic service level, and  may encourage cheating. If
 a zero can option is offered, qualifications must be restrictive.  For equity, significant
 efforts should be expended for inspection.

 Offering a half can service  level is a good idea.  In several jurisdictions it has been
 shown that the service level is adequate for many  smaller households" and provides
 a good incentive for waste reduction and recycling for these customers  (via either
 city or private recycling alternatives).  The jurisdiction could cafl it a  •super-recyder1'
 rate, and promote It m conjunction with recycling programs or goals.  Customers
 may appreciate the recycfirg "package* and the incentives inherent  in the rate.
 Offering this service provides greater customer service, enhances waste reduction
 and  recycling goals, and- is more easily enforced.
    * Over 22% of Seattle, Washington's customers have found the 19-gailon "mint-
can* to be an adequate service level.  Otympia, Washington's 10-gaion toter is selected
by only about 1% of its customers.   Perkasie, Pennsylvania offers a small 20-gallon
bag and found that they represented 15% of the bags sold.

                                     II. 48


Another possible method for providing lower service levels for customers is to
provide collection on alternate weeks.  Should the jurisdiction offer bi-weekly pickup
of a single can as an option for variable can customers with small loads?


In many jurisdictions, the longest period between garbage pickups a customer can
choose is one week. A bi-weekly pickup option would allow variable can customers
to receive garbage service once every two weeks.*  If a customer does not
generate sufficient garbage to fill a whole can every week, the customer could
choose every other week pickup and pay a reduced bill.  Note that the discussion
below focuses on a variable can system because under a bag/tag system with all
fees reflected in the price of the bag, customers who did not fill a bag one week
would not need to place the bag out for  collection until the week it was full.


Recycfing/Waste rtoductiuii incentives
         o   Allowing bi-weekly pickup would provide a monetary incentive to reduce
            waste or recycle for those customers who are already at the lowest
            service level the jurisdiction currently offers.
         o   Bi-weekly collection might possibly provide higher waste reduction and
            recycling incentives because storing waste for two weeks would be an
            added  non-monetary cost

Eojurty  and Economic Efficiency
         o   This rate option would increase the ability of customers to pay only for
            the service they use. For customers with low volume, equity is
            increased  over the current rate structure.

Customer nrvtee/stabHy/aoceptabiity
         o   The bi-weekly option would  be fairly easy to explain to customers
         o   Customers would need to remember which week is garbage week, but
            this may not be difficult if the alternating is done on a whole
    30  In  fact,  such  a service  level is offered  to  seniors  and  single-occucancy
households in Lewisboro, New York:


             neighborhood basis.
         o   Bi-weekly pickup would provide an additional service level option for
             customers with low levels of waste.
         o   The waste storage aspects may not be very acceptable to customers.
         o   Under current health codes in many jurisdictions, bi-weekly pickup of
             solid waste is not allowed.  The jurisdiction may have to modify the
             local health code to allow for this service.
         o   Allowing special options for biweekly can pickup may require some
             work in the billing system, but probably not more than that required for
             the zero can or half can options.
         o   Keeping track of whose waste is collected which week may complicate
             the jobs of collection staff.

         o   Extra enforcement may possibly be needed to assure cans are not
             picked up weekly.
            Allowing for an additional rate option would probably increase revenue
            fluctuations.  However, if changing service levels are correlated with
            changes in solid waste volumes, revenue fluctuations would tend to
            more closely follow fluctuations in costs.

Allowing for bi-weekly collection may increase rate equity and recycling incentives
above current levels.  However, the implementation costs of this option may be high,
including some billing system modifications, and especially routing and enforcement
considerations. The savings that would be generated from this option depend on
whether the collection is dons by in-house staff, or whether the conditions of any
   Ttracts vary as s function of frequency of collection.
The indMduaJ jurisdiction wi need to weigh the pros and cons of this system
against the costs and benefits of the half-can rats option discussed in the previous
section.  They provide many of the same benefits, with different considerations of
cost, implementaUon, and integration.

An  option similar to the bi-weekly change may make sense for jurisdictions with
twice-weekly service.  Going to weekly service may  reduce costs and provide a
lower service level  In addition, it may help fund additional recycling programs.  It


 may. be feasible to substitute a recyclables collection for one of the weekly garbage
 collections, and thereby reduce the cost of the overall system over the costs of just
 adding the recycling collection program to the existing system.40
                            3£RECYCUNG CREDfT

Customers could be provided with an additional incentive to recycle by offering
customers who sign up for city-sponsored recycling programs a credit on their
garbage bill.


An option to encourage use of curbside recycling programs might be to offer a
credit on the solid waste bill to customers who participate.. The credit could take the
form  of either a fixed amount for each participant, or an amount based on the
customer's participation level.


Recycling incentives are already present in both a variable can rate design and a
bag/tag system.  The incentive in each case is monetary - a lower subscription level
or fewer extras will result in a lower solid waste bill.

A recycling credit is another monetary inducement to recycle.  If the credit is a fixed
amount the monetary incentive depends only  on whether or not the customer
participates, not on the level of participation.

To  encourage higher levels of recycling, the credit would ideally be based on
participation level of the individual account.  This would require the collection staff to
keep  track of amounts recycled by  each participating solid waste customer.  There
may not be  a provision for this in existing contracts or job descriptions.  In addition,
the participation information must be fed to the billing system.  Although it may not
seem feasible to track participation, the town of St Louis Park, Minnesota currently
    40 If health codes allow, it may be possible for a jurisdiction to go to alternate week
garbage vs. recycling collection.


 uses a bar-cod* system to record customers that participate in the recycling
 program, and downloads the information to the billing system.41

 The remaining discussion will look only at the fixed credit per participant The
 discussion tends to parallel the recycling credit discussion presented in Section 1.2.

 Rscycfng/Waste Stream Reduction
         o   A recycling credit should increase participation in the recycling
             program, and even a short term credit should increase awareness of
             the recycling programs.
         o   Not providing incentives for selective buying and for customers using
             existing non-city recycling options will have an uncertain effect on total
             recycling volume.
         o   The credit would give customers who are bumping against the lowest
             service level an increased incentive to recycle.

         o   This system would appear inequitable for the participants who recycle
             much of their waste.
         o   Those solid waste customers who, through reuse of goods, careful
             purchasing, and recycling are able to decrease their waste generation
             wifl not be eligible for the credit
         o   Customers who use non-eligible recycling options wifl not be eligible for
             the credit  Even if a  coupon system is developed, allowing private
             recyders to issue coupons good for reductions off the solid waste bill,
             the system wil stifl discriminate against options like unattended drop-

 Customer SeyvicsySlab«y/Acceptablty
         o   It might be hard to explain giving the same credit to everyone
             regardless of their recycling levels. However, the system would be very
             , • i.,, i M
         o   Customers would receive a  very visual reminder on the biO encouraging
    41 In addition, experiments being conducted in Seattle, Washington and Farmington,
Minnesota are tasting the feasibility of integrating the bar-code system with a scale to
attow recording of actual amounts of participation.  These systems are designed to
disrupt current coBection procedures as litfe as possible.  However, these systems may
be even more applicable for jurisdictions that wish to be able charge for solid waste
service  in finer increments, or  wish  to  charge for recycling  or yard waste services.
More information is Included in Skumatz, "Garbage  by the Pound", in  Environmental
Decisions. November 1968.

                                     II. 52


         o  Incorporating a recycling credit into a billing system may require
            significant raprogramming.
         o  Information about new customer sign-ups and dropouts would have to
            be transferred continually into the billing system by the recycling
         o  Defining program participation presents a problem. Customers may
            sign up for programs to get the  fee savings, but may  only participate in
            a minima) way, diluting the effect of the programs.  Should all
            households, regardless of participation level, receive the same credit?
         o  Current contracts or job descriptions may not include  provisions for
            tracking and reporting information on participants.

         o  Staff inspectors or recycling  contractors  would need to periodically
            check up on participants.  A simple credit approach is easier to
            enforce than a variable credit.

Revenue Considerations
         o  Depending on the credit level and the volatility of the number of
            participants, the program may significantly hurt the ability of the
            jurisdiction to predict and therefore cover revenue requirements.
         o  Because the same credit is given for any level of participation, there
            could be significant decrease in  revenues without corresponding
            decreases in costs.


A recycling credit * not recommended.  A recycling credit may increase awareness
of the jurisdiction's recycling programs and may increase recycling, but would be
costly to implement and maintain. The waste stream reduction incentives are not
easily based on the level of participation,  which could be perceived as inequitable.
Also, the level of reduction  cannot be directly influenced.  It provides  very Irttie
benefit beyond the use of volume-based  rates.

In addition, giving reduced  rates for city-sponsored programs causes  a negative
impact on private recycling firms.42 The jurisdiction's current recycling level is
    42 Note that the negative impact on private recycling programs remains for firms
using an unattended drop box system even if a coupon system is developed.


 generally due to efforts of the private recyders, and the rate structure should not
 impact them by only giving credits for "eligible" programs.

 Finally, no incentive is  giver for customers who reduce their waste stream through
 selective buying and composting.  Recycling incentives are probably better handled
 through a variable rate system.  Variable rates provide effective incentives for both
 recycling  and waste reduction.
 Recycling and yard waste diversion programs are often major components in the
 jurisdiction's waste reduction goal.  How should these programs be reflected in the
 system's rate structure?


 Recycling and yard waste programs can potentially divert a significant fraction of a
 jurisdiction's waste stream.  Many program options are possible.  The jurisdiction
 could provide curbside pickup, or could establish either local or more centralized
 drop-sites for yard waste or recydables. Service could be weekly, monthly,
 seasonally, or some other frequency. The customers could either be charged or the
 service  could be offered for free.43  The form of the charges could be:  1) a flat fee
 or subscription;  2) a pre-paid bag or sticker system; 3) another volume-related
 system  (cans, etc.); or 4) some form of weight-based or other variable system.

 The following paragraphs assume that a jurisdiction is considering offering some
 waste reduction or recycling  service or program, and discusses the considerations
 of whether or not the program/service should be offered for a separate fee.
Cfe^^^K ^^^^^~^_ ftfttf^^^^^ f^B^K^^L A^^^^k^K t^Kj^h^b^^^^ ^^fc^fe
i lecycBncywasie neoucoon ncenovea
         o  A separate fee may decrease participation in a specific program.
         o  A separate fee wfl tend to increase the incentives to turn to other
            waste reduction alternatives first including composting or careful buying
            or using private recycling alternatives. This is generally beneficial for
            the jurisdiction, and reflects the waste disposal priorities that give a
    43 Or, as discussed in the previous section, a credit could be applied to the dills.
This was not a preferred option.


             preference for waste reduction and reuse before recycling and before
             disposal.  However, there should generally be legal, well-known
             alternatives for handling recyclables, and waste  reduction information
             should be available in order to minimize incentives to dump waste

Equity and Economic Efficiency
         o   A separate fee that reflects the social cost of the program (which will
             generally be significantly lower than the cost of garbage disposal) will
             tend to provide the proper price signals for the efficient disposition of
             solid waste. The cheapest (out-of-pocket) alternative will be backyard
             composting, careful buying, private recycling, and re-use.  The second-
             cheapest will be the jurisdiction-sponsored program, and the most
             expensive alternative will be the standard collection  and disposal of
             garbage.  Priced properly, these are proper longer-run incentives.
         o   Charging a separate fee is more equitable than embedding the cost of
             recyding/waste diversion programs in the garbage rates. Although the
             jurisdiction may wish to embed the cost of programs in all customer
             rates in order to penalize those customers who are wasteful and are
             not recycling, this system would also penalize those customers who do
             not use the program because they do  not need them because they are
             using alternatives that are higher on the waste disposal priority list  (like
             buying carefully, reducing waste, reusing, etc.)  Charging separately
             assures that those who receive more service pay more.  However,
             savings are still available to those who  use the  programs because  the
             garbage portion of their bill should fall  more than the recycling portion
         o   Charging a fee (even if it is a subsidized fee) will make customers
             more aware that removal of recyclables entails a cost to the system.

Customer Service/Rate StabHy/Acceptablty
         o   Charging separately may lead to more questions from customers about
             the programs and billing, leading to more work for  customer service
             staff.  On the face of it the system appears more complicated and
         o   To customers, it may appear that offering the programs for "free"44 is
             better service.
         o   Charging separately will  lead to long-term rate stability. As the
             jurisdiction's operations shift more and more toward providing recycling
    44  Although, of course, it is not free, but embedded in the rates.  It  is mere
accurately at "no additional charge".


             and other services, continuing to embed the cost of these programs in
             the garbage rates will lead to spiralling garbage rates. Keeping fees
             separate and paying for programs more or less from  their own
             revenues will lead to a more stable system.
         o   Whether or not there is a  charge, customers will need to be educated
             about the programs and options.

         o   Charging a separate fee will complicate billing.  If there is no separate
             fee, no  information about participants  needs to  be forwarded to the
             billing agent, simplifying procedures.

Enforcement            .
         o   If there  is  no separate  charge, enforcement needs are reduced.
         o   Under a scheme  with separate fees, some degree of enforcement will
             be needed to assure that  only those customers paying for the service
             are receiving service.

         o   Charging on a fee-for-service basis will tend to make revenues move
             more with costs.  Services that are used more will generate greater

Providing recycling-type services at no additional cost by embedding the costs of
recycling and yard waste programs in the basic garbage rates will likely be effective
in encouraging customers to sign up to participate in the programs. However, for a
number of reasons, it is usually more  appropriate to charge separate fees for yard
waste and recycling programs.  Cars  must be taken to assure that the fees for
these programs would generally be tower than the cost of  putting out  a similar
amount of excess garbage.4*

Fee-for-service  is a viable end important principle in solid waste, especially as the
functions of a solid waste agency move more and more to providing other types of
service than the traditional garbage hauling and disposal.  It enhances revenue
stabitty, and provides a doser link between costs and revenues.  Such a system will
tend to lead to greater rate stability.  A system that toads recycling program costs
    48 Some level of subsidization of the cost of recycling programs through the
garbage rates may be appropriate in the short run.


on garbage rates will suffer spiralling rates because as the programs become more
successful, the costs must be spread over the fewer and fewer garbage cans or
bags that are used.  In addition, charging for programs provides a signal to
customers that it is not free to get rid of recydables and  may help to encourage
even more cost-effective behavior like waste  reduction, re-use, and composting.
This  kind of approach should help jurisdictions explain to customers why they are
not being paid to have their recydables taken away from their doorstep.
                                 RELATIONSHIP BETWEEN DISPOSAL
                                 PRIORITIES AND RATE INCENTIVES
                                Wast* Reduction. Careful
                                Buying, and Composting

                                Private Recycling

                                City-sponsored Recycling
                                and Waste Diversion Program

                                Garbage to Lanotat or
Most importantly,
requiring a separate
charge for recyding
and diversion programs
reinforces the waste
disposal priorities.
Without a charge for
convenient recyding
programs, there will be
little incentive for
customers to make an
effort to reduce waste
through careful buying
or through use of less
convenient private
recyding alternatives -
both of which are
cheaper for the

Note also that the presence of a fee does not necessarily mean that the parbcipation
in the recyding/diversion program will be undermined.  Seattle charges  a $2.00 per
month fee for the use of its curbside yard waste collection program, and more than
62% of the customers voluntarily subscribed to this system. This program provides
an incentive for customers to backyard compost as a first priority.  Examining Tables
2-1  and 2-2 in Part V shows a list of other jurisdictions that charge for recycling  and
diversion programs.

As a general rule, the principle of paying for recyding programs holds.   However,
some additional  factors may affect whether these charges should be implemented in
a jurisdiction without further thought  Considerations would generally indude policy
                                 Wei-designed Rates can Induce Customer Behavior
                                      That Reflects Waste Disposal Priorities
                                     II. 57

 considerations and the structure of short run costs for the recycling program. "
 However, if the jurisdiction pays for the recycling program stnctty on the basis of
 tonnage, and there is an active private recycling market then a foe should probably
 be implemented. A program fee reinforces the waste disposal priorities, helps keep
 system costs down and provide revenues  for the program, and  keeps the private
 recycling market healthy.  In either case, in the longer run, the fee is an important
 component of an integrated and stable waste management system.
 Structure of the Fee for Recycling and Diversion Programs

 If the decision is made to go with a separate fee for jurisdiction-sponsored
 programs, there are several alternatives for the form of the charge:

  1)     a flat fee or subscription;
  2)     a ore-paid bag, tag, or sticker system;
  3)     another volume-related measure, like a variable can system; or
  4)     a weight-based or other variable system.

 If practical, a system that varies the charge with the amount of service delivered
 would be preferred to a flat subscription charge. And customers that select
 programs that are more convenient, and thus expensive, should have higher  out-of-
 pocket costs for the use of those programs.  In cases  in which the amount of the
 use of the program is not expected to vary much from household to household, an
 argument could be made that a flat fee or subscription charge would make sense.
 If the program is very expensive to provide and the cost varies a great deal with the
 volume collected, then a bag/tag system  or another variable rate method would be
 warranted.   Generally, a variable charge system would  be preferred from an
 incentive, equity, and financial stability point of view.47   However, these advantages
 must be  balanced against the Disadvantages of cost, complexity, and potential
    46 For example, if: the jurisdiction needs a certain participation to meet economical
quantities of recycling or program tonnage,  or to generate sufficient tonnage  for
markets  to consider,  there are no legal options  to fee-based programs (drop-off
recycling, composting or waste reduction information); or it is decided that a fee should
be •pnased-irf to get customers "bought in" to the recycling program; then a jurisdiction
may wish to eliminate a fist  for the recycling program in the short term.  Denver has
decided to charge no fee for the first six months of its recycling program, with a fee
to be implemented later.

    47 This could be accomplished through a separate,  low-cost bag or tag system.


 confusion.46  If the system is
 already complex, a non-zero
 subscription fee may be a
 very appropriate compromise.

 It is critical, however, that the
 price of these programs be
 less than the price of a similar
 amount of standard  garbage
 service, even as the use of
 the service increases.  This
 will encourage customer use
 of the programs and to
 assure that recydables do not
 go to the landfill or
 incinerator. If the program
 itself is not cost-effective,40 yet
 must be offered, it would be
 prudent to subsidize the cost
 of the program through the
 garbage rates.
 Highest incentive
                        Subscription rates
Variable Rates
Variable rates provide stronger WR/R incentives
                     3.8  RATES FOR COMPACTED WASTE


Increasing prices provide an incentive for customers, to compact their waste.
Charging on the basis of volume only may not allow an accurate reflection of
providing the cost of service.  Should additional rate schedules be introduced for
compacted waste?
    40 Refer to sections 1.1, 2.1-2.3. 3.2, and  3.6  for further  discussions  of  the
complexity, equity, incentive, and other issues related to the use of flat vs. bag/tag vs.
can alternatives for solid waste service.

    49 (or if it is deemed that the cost-of-service price is not sufficiently below tne price
of garbage service to provide appropriate incentives)
                                     II. 59


 Volume-based rates for either cans/bags or dumpster service, per the definition, tend
 to.charge on the basis of the volume of waste removed.  In some cases, particularly
 for dumpster service, the rate structure may take into account a variety of
 considerations, including the  number and size of container(s), frequency of pickup,
 and perhaps extra charges related to placement

 Currently some dumpster  and can/bag customers may use compactors to reduce
 the volume of their  solid waste, enabling them to pay for a lower service  level than  if
 the waste were uncompacted.  If the cost of providing service within a jurisdiction
 (whether that be collection, transfer, hauling, and disposal service), depends at any
 stage on the weight of the waste, then these  customers would not be paying their
 appropriate share of cost  of service.

 In many jurisdictions, official weight limits currently exist for residential can service.
 Except for practical considerations (the truck must be able to lift It etc.), most
 jurisdictions do not set official weight limits for detachable containers, and a limit
 would be difficult to measure and enforce.90


 Dumpster service:

 Overall dumpster rates would generally be the composite of several major
 components of cost of service, including the customer charge, the collection charge
 (including number and type  of containers, frequency, and location considerations),
 and the tonnage or volume-related fee.  If, for instance, the tipping fee  is tonnage-
 related, it is dear that compacting  customers are incurring higher tonnage costs for
 the solid waste jurisdiction than other (non-compacting) customers at the same
 subscription level.   From a cost of service rationale, it may not be equitable to
 charge these customers the same rates for service as non-compactng customers.
 However,  because compaction generally makes it possible for the jurisdiction to load
fewer (or smaller) containers and reduces the frequency of collection trips, the
charge should only be increased based on the tonnage (or scaled-up volume)

Higher charges could be implemented for detachable container customers with
    90 There has been some research by truck and scale manufacturers into developing
an integrated scale system for weighing dumpsters at collection, but the approach has
had limited or no field experience.

 compactors.  Customers with the compactors located adjacent to the container are
 easily identified.  However, because multi-family building owners (who may be
 directly billed for garbage service) can envision a stream of savings over time from
 reduced garbage rates, there may be an incentive to install individual trash
 compactors in each unit of.a (new) multi-family  building.  Ideally, this type of
 customer should also be charged at the higher rate.

 Variable Can  or Bag systems:

 Variable can prices are set based on number of cans or bags (volume measures)
 and not weight  Higher rates provide an incentive for customers to reduce
 subscription or usage levels. Some  households will react by reducing waste or
 increasing recycling, but others may "stomp" the waste or install a trash compactor.
 Most will employ some  combination of approaches.  The cost for the jurisdiction  to
 dispose of  compacted waste would be higher than for a can of uncompacted waste
 if the tipping fee in the jurisdiction (or any of the other components of cost of
 service) is based on tonnage, not on volume.  Therefore, under a  cost of service
 scenario, the  rate for compacted  waste should be higher for that jurisdiction.

 The following  section discusses the major aspects of charging a separate, higher
 rate for compacted waste, and applies to both cases of compacted waste in
 dumpsters  or cans/bags.


 Recydng/WastB Stream Reduction Incentives
        o   Compactor rates would enhance recycling incentives  because
            customers could no longer reduce subscription levels by compacting

        o   Equity between customer classes would be enhanced by the
            introduction of special rates for compacted waste.  Customers could be
            charged closer to cost of service,  and customers who used more
            service would pay more.
        o   Incentives  for investing  in compactors are reduced, so customers who
            cannot afford or have no room for compactors are not penalized.
        o   Implementing a compacted rate now will provide more equitable pricing
            before  more customers purchase compactors.
Customer Service/Rate Stabffity/Acceptabflity
         o   Identifying all customers using compactors would be difficult, and


             guaranteeing consistent treatment would be impossible. CSRs would
            have a hard time explaining why one customer and not another was
         o   Customers who currently own compactors would probably not be
             pleased to be charged more, but the general public would likely
             understand and accept the logic behind higher charges.

         o   Identifying customers with compacted waste would be very difficult for
             can customers.  Most dumpster compactors are located next to the
             container.  However, for can customers, compactors are located in
             housing units and not next to the cans.  If toters are not lifted, cans
             with compacted waste  are not easily identified.  Dumpsters with  waste
             that has been compacted through the use of household trash
             compactors will not be easily identified.
         o   The billing  system would need to develop programming to allow a
             special (higher) rate schedule for these customers.
         o   Information on customers with compacted waste would need to be
             collated and transferred to the billing system.

         o   It may be very difficult to enforce a fair and comprehensive compacted
             rate, especially for can customers. Weight limits may be a practical
             alternative to penalize gross abusers.
         o  Changes in revenue may vary more dosely with cost of service.  The
            tipping fee/tonnage differential could generally be recovered.


The following conclusions art only applicable if a portion of the jurisdiction's cost of
providing service varies on the basis of the weight of the waste.  In other
jurisdictions, differential rates cannot really be justified on the basis of cost-of-
servics.  However, from an equity point of view - that customers who use more
service should pay more - there may still be a case for considering differential rates
even in junedfctions in which cost elements are not weight-based.


Because increasing rates provide an incentive to install compactors to decrease
service levels, the jurisdiction should  seriously consider instituting higher rates for
customers using compacted dumpsters.  Although currently there are few customers


using compactors, the technology is available and increasing rates will encourage
wider use of these compactors in the future.  Policy should be established sooner
rather than later.  If the service is priced property, this should not encourage or
discourage the use or installation of compactors, but should  allow more appropriate
recovery of the costs  of providing service.

The identification of dumpster customers that employ big compactors will  not be
very difficult because of the fact that the compactors are usually located next to the
containers.  Depending on how billing is carried out, changing the billed amounts for
those accounts with compacted dumpsters should not be very difficult to  implement.
The customers should be billed for a higher tonnage amount, but charged based on
the same frequency and  number of containers.  Until a scale system becomes
practical, it will probably not be possible to identify or charge higher rates fc multi-
family buildings with trash compactors in individual apartments.

Variable can or bag/tag customers:

Equity concerns would indicate that a higher rate should be  implemented  for variable
can customers compacting waste or using trash compactors, preferably on the basis
of the actual weight of the can.  However, practical difficulties make fair
implementation nearly impossible.  Currently, the approach used by most
jurisdictions is to impose a per-can weight limit  Collection staff may elect not to
collect a can that is excessively heavy, identification of households putting out
compacted trash, however, tends to be very difficult In the  extreme, under a
system of semi-automated toters, the toters will not generally be lifted by  staff but
will instead be lifted by machine, so heavy cans will be less obvious.  Until
technology improves to allow customers to be charged based on actual can weight,
the jurisdiction should consider imposing  specific weight limits for each can and toter
size. These weight limits should be lower than the container full of compacted

This  solution will provide  an  enforcement  mechanism for gross abusers (and will  be
spotty at best), but provides some limits for potential compactor users. Further,  it
provides the jurisdiction with an upper limit on the tonnage it would collect from  any
one garbage can paid at the variable  can rate, and limit the  inequities from
customers paying similar amounts for very different service.


 Should separate rates or credits be established for low income customers?  What
 forms could subsidies to low income customers take?  How can low income
 customers be provided with rate assistance?


 One important part of implementing volume-based rates is generally passing an
 ordinance that requires mandatory fees and service.  In some areas, depending on
 the level of the rates, and despite the fact that variable rates give the customers
 more control over the level of their bill, the new rates may be considered
 burdensome to customers with low incomes.

 This burden would  generally become an issue in jurisdictions in which the fees were
 not shown separately before and a new burden is perceived; or where the fee was
 assessed on a basis that tended to fall less on the poor (for instance, fees  raised
 through the property tax. and the housing values  were lower for the poor).   The
 jurisdiction may feel.it worthwhile to offer discounted rates to these customers.


 Many electric utilities and some solid waste jurisdictions offer subsidies to qualified
 low income customers.  Six basic (non-exdusive)  forms for a low income rate are
 discussed below.

 Aid could be offered to qualifying households in several ways:

         1)   Equal  grant or credit for all eligible households.
         2)   Offer a Hfstine* block of service priced below cost of service (but
             preserve the additional amount that must be paid for more service).
         3)   Offer discounts on rates across some or all service levels that preserve
             a portion of the marginal cost signals to  promote efficient use of the
         4)  Assistance in proportion to the size of the oifi • an equal percentage
            cSscount across af service levels.
         5)  A seasonal discount, offering more assistance during periods of higher
         6)  Emergency funds.
                                     II. 64

 For the most part, any of these options can be implemented in some manner with
 either a bag/tag system, or a variable can option.  In the bag/tag system, a color-
 coded system might be the easiest way to implement discounted rates51, while a
 separate rate schedule would be used in preparing the bills for the eligible
 customers under the variable can system.

 Two of the systems above are fairly simple in design, and are nearly equivalent in
 implementation:  the equal grant and the discounted "lifeline11 options.  The first one
 is based on the assumption that rate assistance should take the form of an "income
 transfer*.   The second assumes that lower income customers have the  right to
 some basic service level at a reachable rate.  Implementation of both of these
 options would tend to take the form of a discount off the customer charge, or fixed
 portion of the bill, and would  not decrease the additional amounts that must be paid
 for higher levels of service. This has the effect of offering inexpensive basic service,
 yet preserves the full impact of the marginal component of the rates and the
 incentives to reduce waste.

 In general, the equal sum and lifeline options provide simple income subsidies to the
 customers.  However, the levels of assistance are invariant with respect to household
 size and usage levels.  No reductions are given for higher  levels of usage.
 Because it may be argued that volume of garbage production may be related to
 family size, these might not represent optimal designs for solid waste subsidies If the
 objective is, instead, to help low income customers pay the solid waste bill.

 The third option modifies the  previous options by offering  some level of  discount
 (possibly non-equal) off the cost of additional cans.  This has some appeal in the
 case of low income families, because it reduces the burden of the cost of extra
 service levels, but still preserves the signal that more service costs more.  The fourth
 option achieves the same objective,  but takes a slightly different form  (a percentage
 discount across all levels of bill).  One difference is that the third option may  stop
    91 It may not be desirable to identify these customers with specially-colored bags.
Another alternative would be  to  allow  customers qualifying  for the lower rates to
demonstrate  eligibility at the point of purchase and then pay a lower rate  for the
standard colored  bags or tags.   One problem  with a system like this  would be the
potential  for  low income customers to  purchase subsidized  bags and sell  them at
discount to non-eligible customers.  This may not be a large problem, but should be
acknowledged.  Another option  for some bag/tag systems  would be to offer the
discount  on  the basic customer charge but have  the  same price for bags for ail
customers, including low income purchasers.


 assistance at a certain usage level (e.g., no additional assistance above four cans).92

 The fifth option, the one with a seasonal component can be used to modify any of
 the above rate assistance designs.  It would merely increase the level of the subsidy
 (whichever form it takes) during higher usage periods. In the solid waste case, it
 might take the form of higher assistance during high yard waste periods.  However,
 in general it is much more applicable to the case of electric utilities (where additional
 assistance may be needed in winter to help with heating bills), or perhaps, water
 utilities.  There is not a  strong case for such a system in the case of solid waste.

 The final option » the emergency fund alternative. This option would eliminate the
 need for special rate credits by instituting  a voluntary contribution system.  At some
 electric utilities, residential customers are offered the possibility of overpaying their
 service bill, with the excess going into a fund to help the poor pay their utility bills.
 The fund can  be administered by the jurisdiction or by a social help organization
 (Salvation Army, etc.) to limit administrative and qualification burdens on the solid
 waste  agency. This can enhance the public image of the utility.  However, the level
 of willingness to contribute among solid waste customers may be lower because
 bills are perceived to  be too high already  and willingness to contribute may be also
 be a function of the amount that bills rise  in the next  rate case.  In addition, the
 analogy with electric rates may not  be strong enough. The image of the poor (and
 the elderly and children) freezing in the dark because they cannot pay heating bills
 may be more  compelling than the image of the poor  drowning in uncoliected

 In considering these options, there  are several important issues to keep in mind.
 First, under a  volume-based system the cost of this low income subsidy program
 falls on other ratepayers.  The jurisdiction  must consider what is equitable to other
 ratepayers to bear in  deciding on the optimal low income rate design. Any discount
 to low income customers raises other customer rates. It should be considered
 whether there  is a better avenue for this income assistance to take than reduced
 garbage rates, for example, increased income assistance programs, etc.

 Second, the cost of assistance on additional cans/bags can become high, and a
 decision should be mads about whether a "cap" on the discount is appropriate.  The
 excess waste may be related to larger families, or may be related to wasteful
 behavior. The jurisdiction may consider whether it is appropriate to ask the general
 ratepayer to subsidize other ratepayers with large families or because they produce
    92 For example, Seattle provides a 60% discount off the mini-can and one can
service, 20% off the second can of service, and provides no additional discount for
service levels above two cans.


 higher levels of waste for other reasons.  In addition, the jurisdiction may wish to
 have all customers face the full waste reduction/recycling incentive that is inherent in
 the rates for additional service levels.  On the other side, the low income household
 advocates  may consider it inappropriate for other ratepayers to judge how much
 waste is too much, or judge what constitutes wasteful behavior.  These are the types
 of tradeoffs and decisions that the jurisdiction must make.

 The jurisdiction must also decide which customer groups it wishes to extend
 assistance  to. Groups that might be considered for eligibility could include all low
 income households53, low income households with children, low income elderly
 customers, low income disabled customers, or other targeted groups.94  The
 jurisdiction  might simplify its certification  procedures  by using the criteria associated
 with existing federal programs.  Alternatively, special certification and billing difficulties
 would be avoided if the solid waste agency bills for  its service in conjunction with
 other utilities that already offer discounts for these customers. Detailed discussions
 of certification, level of the credit, changes in the credit over  time, and other issues
 are not included in this paper, but the jurisdiction should recognize that it may
 involve substantial work.


 In general,  some level of assistance for low income customers is probably
 appropriate.  Solid waste service is a basic health need, and as landfill and other
 costs rise,  the price of this  service can become burdensome. The assistance can
 come from one of the above  suggestions or may be an income transfer from the
 City's general fund or other mechanisms.  The decisions whether to offer assistance,
 to whom to extend the assistance, and the level and form  of the assistance are
 purely policy decisions.

 The jurisdiction could simply offer a minimal level of service at below cost  However,
 enhancing  that option by offering  subsidies with discounts for some additional
 blocks of service may make sense for low income customers and also may not
    93 This to usually defined on the basis of a percentage of the poverty level, which
varies with family size, or a similar approach based on  percentage of state median

    94 For many years, Seattle, Washington has offered discounted solid waste rates
for low income elderiy and low income handicapped customers. These groups were
fairly  simple to certify, and did not generally  need frequent re-certification because
status for these groups tended not to change.  Other groups might need very regular

                                     II. 67

.unduly penalize larger low income families.  Fixed subsidies that do not vary by
usage or offer no allowance for variations in household size may cause problems for
larger low income households.   However, they minimize the amount of the total
subsidy that mus: be borne by other customers.   Variable rates offer some control
over the bill and incentives for the customers  to increase  the amount of recycling
and waste reduction activities they pursue, and the subsidies discussed generally
retain these incentives.


 Rates for multi-family buildings are not as straight-forward as those for single family
 occupants.  What are some rate designs that might make sense in a multi-family


 An ideal  solid waste system would have rates that achieved a number of objectives.
 For example, they would be fair, simple, encourage  waste reduction and recycling,
 and be enforceable. Although many of these objectives can be achieved in single
 family buildings through options that have been discussed previously, the case of
 multi-family buildings poses a host of special problems.  These problems are not
 unique to the case  of solid waste - rate options for multi-family buildings can be
 complex  for any utility,55 but may  be especially so for solid waste service.  And
 unfortunately, multi-family buildings are often a large, and generally growing,
 segment of customers in most jurisdictions.

 The problems can be of the following types:

         o    The tenant (who is also the garbage-producer) is often not the bill-
             payer,5* and so rate incentives are diluted through rents or other
             mechanisms.  Incentives for sensible use of the service and for
             recycling car be lost

         o    There  are prcotems  of joint garbage areas.  Not only are bills not
             directly paid by the tenants, but tenants may not feel responsible rf they
             over-produce or over-dispose of waste- because of the problem of
             determining which tenant is over-using the service.
               of the difficulty of getting conservation incentives to customers in murti-
family buildings when they were "master-metered", most electric utilities have switched
to Individual metering* and separately billing each apartment within  a multi-family
building.  Unfortunately, it  is difficult  to  envision a practical  method of 'metering'
garbage service.

    96 And with frequent move-ins and move-outs, the jurisdiction may not want to bill
anyone other than the property owner.


         o   It can be difficult to maintain rate equity when some multi-family
             buildings select bag or variable can service and others select dumpster
             service.  Maintaining equity between two very different structures is not
             an easy task.

         o   Maintaining equity between multi-family and single-family customer
             rates,  and between large and small multi-family buildings can also be

         o   The fact that some costs may be property allocated on a building
             basis, some on a household basis, and some on a volume basis
             makes designing rates for multi-family applications  much more complex
             than for single-family buildings.

It would be possible to bill multi-family buildings on a fixed-fee basis (either per-
building, or more fairly, per household).  However, that approach would eliminate
any possibility of providing signals to either the property owner or the tenants that
reducing waste is a benefit87

The options for this sector are not very well-explored.  Many jurisdictions may not
have direct control  over multi-family buildings because it treated them as part of the
commercial class and left the service to be provided by the private sector. Other
jurisdictions may provide service to multi-family buildings through dumpster service
and have not considered alternatives or incentives. Even jurisdictions that serve
multi-family buildings  and offer service options, may have been addressing the
incentives and problems of the single family sector first, and the multi-family class is
getting  attention only now.

In most multi-family buildings the landlord is responsible for the  solid waste bills -
for either dumpster or other service.  Generally the cost is considered a part of
maintaining the building and is passed along to tenants as a component of the rent
The cost is averaged across al tenants, and although in some cases it may vary
based on the number of bedrooms, it is not based on solid waste behavior or the
amount a household  recycles.  Therefore, tenants receive no direct incentives to
participate in waste reduction or recycling activities, or reduce the amount of waste
they put out for collection.   The rewards for recycling and waste reduction efforts of
an  individual are dfluted among aft tenants.  Individual accountability and incentives
are lost

There are no simple or sure solutions in this sector.  However,  although the  problem
    57 The pros and cons of this option were discussed in section 1.1.

                                      II. 70

 may seem difficult, there may be at least two possible volume-based approaches
 that may be practical in multi-family buildings.

         1) A bag or tag system, with a per-household customer charge, or
         2) A variable can subscription approach.

 How practical  either of these alternatives may tend to vary based on the size of
 buildings.  In larger buildings, tenants w\\ tend  to be more anonymous and feel their
 particular actions are less traceable. Locks may be needed for dumpsters or cans
 to prevent  residents of other nearby buildings from using  a building's service. Also,
 implementation problems will tend to increase with building size.

 Bag/tag alternative: A bag or tag system could be implemented in a manner similar
 to the way it would work in the single-family situation.  Tenants would be made
 responsible for purchasing official bags or tags for disposing of waste.  If the full
 cost of disposal  is not included in the price of  the bags, the per-household charge58
 could be assessed through a bill or through the property  taxes."  Then all the
 waste that  is in official pre-paid bags or that is  tagged with pre-paid stickers  would
 be picked up. Presumably tenants would be made responsible for paying for the
 bags, which would assure that some of the waste reduction incentive inherent in the
 rates is passed to  the waste producers. The bags would be deposited in a central
 area, in cans,  or in dumpsters.

 However, some buildings may need special enforcement efforts to try to reduce the
 amount of waste that is disposed in unofficial bags or waste that is not tagged.60 S1
 This may be a problem, and the  relevant ordinances may need to make the landlord
 ultimately responsible for charges for this waste.
    90 (either the same in level as the single-family customer charge or somewhat lower
to take account of the savings from clustered containers)

    90 This would generally be billed to the property owner, rather than tenants.

    40 We are not currently aware of any jurisdiction using this system, so are not sure
how much of an enforcement problem would be experienced.

    61 One option that may  or may not be practical would be to make the manager
responsible for selling bags for the building, and at least the manager would be aware
of which tenants were not buying sufficient bags.


 Variable can system:  Under a variable can system, building owners would be asked
 to select a subscription level for the entire  building.6  Then waste up to that
 subscribed volume (plus any pre-paid extras, if allowed) would be collected for that
 fee. There are several problems with this approach.  First, the bill is generally paid
 by the landlord, and the waste reduction incentives are fairly invisible to the tenant.
 Second, billing is fairly complicated. The bills would generally be calculated on a
 per-household basis to keep similarities with single-family charges, and then
 combined into a single bill for the building  for the landlord. Also, there are free rider
 problems because individual tenants may use more than their requested allotment
 during a month and tracing that offender may be difficult  Small buildings may be
 able to provide separate, labelled, and possibly lockabie cans for each of its tenants.
 However, an approach like this would not be possible in buildings with many
 tenants, and the free rider problem would remain.

 Other possibilities:  Another approach may be to work with owners of buildings to
 offer building-specific programs.  As solid waste costs increase, building owners may
 recognize they can save significant amounts in garbage disposal costs if it can get
 tenants to reduce the amount of waste they dispose.  It may pay them to introduce
 building-wide recycling programs and provide rebates or other incentives to tenants
 that participate.  If the jurisdiction can justify it on avoided  cost grounds, it may
 choose to:  1) underwrite part of the cost of the recycling  program or its
 administration*3; 2) offer  a per-ton credit to the owner or recyder based on the
 amount of tons recycled; or 3) help increase the size of the rebates for participants.
 It is not dear how practical these alternatives are. If building owners do not react
 adequately to cost as an incentive to pursue programs, it may be possible (although
 probably politically difficult) to introduce legislation that requires convenient
 opportunities to recycle for all residents.  The onus of the legislation could be put on
 building  owners to obtain the services, or on haulers to provide these services as
 part of having the right to haul garbage.  In this case it still may be financially
 sensible for the solid waste jurisdiction to offer monetary incentives to some  of the
 players to improve the success or effectiveness of the programs.
    62 Seattle, Washington has used this approach for some time for non-dumpster
multi-famiy customers.   However, the system  does not provide strong incentives to
tenants and it it fairly cumbersome. The City's comprehensive solid waste plan targets
multi-famly rates as a major issue to tackle in the future, both for billing reasons and
to look for ways to increase recycling incentives, especially as the City plans apartment
recycling programs.

    63 This could be achieved through paying  the building  owner to help  pay for the
program, or through diversion credits to the recycling contractor.

                                      II. 72


Billing for multi-family customers is a difficult problem.  Several possible, although
imperfect options are presented.  In general, the objectives remain the same as for
single-family customers - to provide incentives through the rates for waste reduction
and recycling, to keep the billing and customer information as simple as possible,
and to be equitable between customers.   A phased approach or pilot testing of the
workability of some alternatives may be needed in this sector.

                                6.0 SUMMARY
A number of proposals have been considered. Based on an evaluation of the
performance of the rate designs with aspect to the criteria used, the following
general conclusions can be drawn:

        o   Volume-based rate options  (either a bag/tag or variable can system)
            provide much better and more consistent waste reduction incentives
            than the simpler fixed-fee alternatives.  Volume-based rates encourage
            both waste reduction and recycling, and do not favor any particular
            program.  They are fair and understandable, and are reasonable to
            implement  Mandatory service is an important component  They
            assure that customers will not go around the rate system, and it will
            reduce the incentives for illegal dumping.

        o   Bag/tag systems have some advantages, especially for smaller and
            medium-sized jurisdictions because the charges come closer to
            reflecting actual usage of solid waste as opposed to charging for
            subscribed levels of service, they do not generally require complicated
            billing systems, and the systems are fairly easy to implement

        o   Steeper rate structures (those that charge relatively higher amounts for
            additional service levels) will enhance the recycling and waste reduction
            incentives, but within  limits.  After a point, steeper structures  will tend to
            make  illegal dumping too attractive,  and the risks of not recovering the
            revenue requirements becomes too  large.

        o   Offering both backyard and curbside service options is preferred from
            a customer service point of view.  However, a higher rate should be
            charged for backyard or carry-out service.   This allows customers to
            select the level and type of service they want and gives them  control
            over their b*.

        o   in conjunction with selecting a volume-based  rate system, there is
            almost certainly a need for  a service level smaller a full can,  and
            perhaps a need for a smaller-than-standard bag.  A very  significant
            portion of customers can, through careful buying and recycling, reduce
            the* service needs substantially, and it is countar-productive to
            •truncate* those recycling incentives at too high a service level, ft may
            not make sense to offer the more unrealistic "zero can" option, in
            addition, providing a  smaller volume container is probably preferable
            and less confusing than offering bi-weekly pickup of waste.

         o   A recycling credit is not a very useful enhancement to a volume-based
             rate unless there is a need to draw attention to a jurisdiction-sponsored

         o   Structuring the rates in the jurisdiction with a "fee-for-service"
             perspective is probably the best long-term approach.  That includes
             charging a separate (but smaller) fee for the use of recycling, yard
             waste, or other programs.  This enhances rate stability, and provides
             the most appropriate price signals for customers' waste disposal
             decisions.  It also gives customers control over their bill, and assures
             that their behavioral decisions are accurately reflected in their bills.

         o   If feasible,  and if costs at the jurisdiction are not totally volume-based, It
             may be fair to charge slightly higher rates to customers with
             compacted waste.

         o   Some system of reducing the burden of the rates to segments of the
             low income population may be appropriate.
These recommendations will not be the right answer for every jurisdiction.  The
detailed discussions in this part of the report have highlighted tradeoffs and issues
associated with a wide variety of rates and system options. Each jurisdiction should
evaluate the recommendations  and alternatives in the context of the particular
conditions in effect in its area.

A careful reading of the section of this report on feasibility and cost-effectiveness of
volume-based rates (Part 0 should be conducted before final decisions on the
structure of rates is made.



    Introduction: Determining Rates	III. 2
1.0 Module 1:  Demand	III. 6
1.1  Estimating Customer Counts	III. 7
1.2 Estimating Tonnage Disposed by Type of Service	III. 8
1.3 Forecasting Recycling Tonnage and Participation	III. 10
1.4 Disaggregating Tonnage for Customer Classes	III. 16
1.5 Estimating Variable Can Subscription Levels or Purchases of Bags	III. 17
2.0 Module 2:  Revenue Requirements Analysis	III. 22
3.0 Module 3:  Cost Allocation	III. 29
3.1 Allocations between Rate Categories	III. 30
3.2 Allocations within Rate Categories	III. 31
3.3 Importance of Planning Ahead	III. 33
4.0 Module 4:  Rate Design and Calculating Rates	HI. 36

5.0 Summary.		III. 40

                                INTRODUCTION! DETERMINING RATES
             The process of determining rates involves four basic steps.  A schematic of the
             relationship between the steps appears in figure 1.
                   DEMAND    I  Service Needs   w |    REVENUE
                           Calculated                           J_ Costs
                    RATE       | ^    Costs by       |       COST
                   DESIGN     W^™11"11"™!  ALLOCATION
                   	       I         Class         I	
               Figure 1
             Module 1 - Demand: This step analyzes the demand for each type of service
                       offered for each customer class. It generates estimates of the number
                       of tone or cubic yards disposed1 (by program or customer type),
                       customer counts by type, and number of service units used (e.g.,
                       variable can subscription levels or bags/tags).

                       Because the demand module contains a great deal of information that
                       is iceJy to be new to jurisdictions which do not use a volume-based
                       rate system, the description of this module is fairly long and detailed:
                1 Some jurisdictions measure waste based on tonnages and others use measures
            of volume like cubic yards.  To keep the wording of the discussions from getting
            awkward, a tonnage-based system is assumed. However, the discussions are directly
            applicable to systems that use volume measures like cubic yards.

                                             III. 2

 Module 2 -   Revenue Requirements:  This step analyzes the costs that would be
             incurred meeting the demand for services estimated in the demand
             module. The revenue requirements module evaluates all the activities
             that would be required to provide the services on a cost-center basis.
             The module considers  staffing and equipment requirements, production
             and cost relationships,  and estimates the total costs. These, along with
             financial considerations, provide  an estimate of the total amount of
             revenues that need to be collected from all sources, including  rate and
             non-rate revenues.

 Module 3 -   Cost Allocation:  This module analyzes how the revenue requirements
             calculated in Module 2 are to be distributed  between and  within
             customer classes.  Relationships are developed that allow the
             jurisdiction to attribute the system's costs (or revenue requirements)
             based on the type of service delivered and the customer class served.

 Module 4 -   Rate Design:  In this step, the form and relationships of the rates to be
             charged are determined.  Then the module calculates the  levels of
             rates that will recover the amount of  revenues needed from each
             customer class and service type.

 Equilibration:  Going through these steps once will produce a set of rates, tons
             costs,  revenues, and services.  However, the rates that are calculated
             after one set of calculations  are  different from those used  as the
             starting values, and will lead to changes in the forecast levels  of
             demand.  It will generally be necessary to re-run the model using the
             new estimated level of  rates to re-estimate the level of tonnage and
             services that would be associated with the new rates.   Rates (or prices)
             are expected to influence the amount of service that customers will
             demand.  That new level of  demand for services will lead  to changes in
             the revenue requirements, cost allocation, and calculated rates.

             Generally, the series of steps must be performed several times before
             the system reaches "equilibrium", or  achieves a set of consistent
             answers that lead to only small changes when the modules are run
             again and the steps recalculate  results.

Each of the modules will contain assumptions, relationships, and calculations that
depend on the particular jurisdiction's situation. Because  no two solid waste
jurisdictions are alike, even in the basics  like  services, costs, and customer types
each rates model will be different  This section discusses some of the basic
approaches and generic relationships, which  must then be tailored to the particular

                                     III. 3

 jurisdiction being modelled.

     Module 1:    AnyTown projects that, charging its 100 residences an average
                  of $80/year and sett-haulers $5/toad for 10,000 toads delivered
                  to the landfill, it wi! handle 1000 tons/year.

     Module 2:    Handling tOOO tons wili require $150,000 of revenue.

     Module 3:    Residences are responsible for  $100,000 of  expense; setf-
                  hauiers for $50.000,
     Module 4:

Residents' new rates set to average $100Vyear; self-had rates
left at $5.
Rates from Module 4 are used in Module 1; process
untfl rates change very Ittie on successive tries.
The complexity of the solid waste system determines the sophistication of the tools
needed to complete the analysis. It is difficult to imagine that an integrated rate
analysis can be done with a computer tod much simpler than LOTUS, and more
complex computer tools such as SAS, GAUSS, or other systems may be needed  for
more sophisticated systems.  The benefits of using languages such as these include
flexibility to model alternative relationships and scenarios, being able to enhance the
model over time, being able to integrate graphics, and being able to make the
model more user friendly.

The following paragraphs explain each of these "modules" in more detail.
Presumably, analyses similar to this are currently performed in generating solid
waste charges, whether they take the form of actual rates, or tax assessments,  or
other charges.  Therefore, the discussions below will highlight differences or changes
that may be necessary with the implementation of variable rates. These  changes will
be  concentrated in the demand and  rate design modules, with some effects also
evident in revenue requirements  and  cost allocation procedures.

However,  moving to an integrated solid waste system with variable  rates will involve
a considerable  amount of staff work.  The solid waste system, its customer groups,
                                     III. 4

revenue sources, services, and costs must be examined  in detail and the
relationships understood by staff.

Because some of the terminology and concepts are confusing to discuss in the
abstract, this section includes illustrations and examples,  largely drawn from a case
study of Seattle, Washington. These illustrations certainly do not provide answers
that are applicable everywhere:  rather, they are used to clarify points, techniques,
or objectives.  Every solid waste jurisdiction is configured differently, with different
customer types and services offered.  The specifics shown in the examples would
need to be  significantly modified to fit the  jurisdiction's situation.
                                      III. 5

 This part of the rate study estimates the demand for each type of service offered for
 each customer dass. These estimates of services demanded are used in the
 revenue requirements, cost allocation, and rates calculation sections. Depending on
 the sophistication of the analysis, the demand module may include a variety of
 socio-economic variables, estimated  equations and relationships, and starting values
 for the variables.

 The  demand section generates estimates of the number of tons disposed  (by
 program or customer type), customer counts by type, and service levels demanded
 (cans or bags/tags). Customer counts and  tonnage by type of service and service
 levels are used in estimating the cost of providing the various services  (module 2).
 The  number of customers, tonnages, and service units are used -in determining the
 allocation of costs and the final rates (modules 3 and 4).

 The  jurisdiction must carefully list every type of service that it offers to customers
 that  leads to a cost or that it may charge a  rate for.  In addition, it must determine
 every customer group that uses these services that may demand the service and/or
 be charged for its use.

 The  types of service that a jurisdiction may offer generally include one or more of
 the following:

  o   collection and disposal from cans or bags/tags
  o   collection and disposal from dumpsters
  o   transfer station services (transfer, hauling and  disposal),
  o   a variety of recycling and/or yard waste programs (collection or drop off),
  o   landfilling or other disposal services Gndneration, etc.).
  o   other optional services (including differentiations like distance from curb, curb
      vs. carry-out, bufcy-ttem service, etc.)

Customer segments for any or all of these services may include:

  o   single-famfly
  o   rnutt-farnty
  o   conwTierctal establishments
  o   industrial establishments
  o   self-haul or drop off customers
  o   large cornrnercial haulers
  o   others.

     The basic steps Involved in a volume-based rate analysis enclude:

     1.1)    Estimate the number of customers using each type of service you
            plan to charge for  (residential  dumpster service, transfer station
            customers, single family vs. multi-family pickup, etc.)

     1.2)    Forecast the  number  of tons disposed  by  aggregate sectors
            (residential, commercial, etc,) based on rate and  economic effects
            and other factors

     1.3)    Forecast tonnage for new recycling programs by customer class,
            including recycling program volumes or tons collected and program
            volume diverted from any existing  private recycling

     1.4)    Disaggregate  net tonnage (for solid waste and  recycling) into
            component customer classes  (e.g.,  residential may  need to  be
            disaggregated into dumpster vs. non-dumpster volumes)

     1.5)    Using net tonnage by customer dass and rate effects, determine new
            service levete  by customer dass and estimate  the  number  of
            participants for recycling and yard waste programs.

Customer count information is used in two major places in the rate analysis: for
estimating the costs of providing service, and for dividing the revenue requirements
among users to determine rates. However, in some cases, costs and rates will not
be customer based, but will be solely calculated on a tonnage basis.  In this case,
the jurisdiction may not need to generate estimates of sheer numbers of customers.

Estimates of customer counts for residential pick-up by dass usually consist of
current data on customer counts and extrapolations based on forecasts of growth in
number of households.2 Useful forecasts of growth are usually available from local
    2 If commercial customers are also part of the customer base for the solid waste
jurisdiction, then counts of businesses, etc. may also be needed. Similar sources for
information may be useful, as well as Chambers of Commerce or state Departments
of Revenue. Note that this section on the process for determining rates concentrates

                                    III. 7

 economic entities (offices of planning, city/county budget departments, etc.) or from
 other local utilities.  These entities usually provide separate growth information for
 single-family vs. multi-family households.  Other possible sources of information may
 be data on demolitions and housing starts or, in a pinch, extrapolation based on
 customer counts over the last few years.

 Customer counts for other services  (such as transfer station or landfill usage, etc.)
 may be needed if:  customers are charged set fees per use (per auto trip), or if a
 known relationship exists between the number of customers visiting the transfer
 station or landfill and the cost of operating that facility.  In this case, the customer
 counts would  be used in generating estimates of revenue requirements,  and
 determining the level of rates.

 The purpose of this part of the rates analysis is to determine the number of tons or
 volume that will be disposed by customers through each type of solid waste service
 that the jurisdiction provides. The estimate or forecast will be used in determining
 the cost of providing service to customers in the revenue requirements section, in
 estimating the amount that users of each type of service should pay in the cost
 allocation sections, as well as in determining the final level of rates.

 Estimating the number of tons (or volume)  disposed can be done at several levels
 of sophistication.  The simplest method is to use a trend analysis.  In the case of
 jurisdictions with minimal data available and with few changes in the basic system,
 this  may be all that is possible.

 However, changing to a variable rate system may impose more changes in behavior
 than would be  reflected in a trend-type analysis.  More sophisticated analyses would
 require more steps.

 The  approach economists take in dealing with this problem would be to generate a
 forecasting equation.  This econometric analysis would involve gathering historical
 data on tonnage or volume  by program and customer type, as well as historical
 (and forecast) values of socio-economic (causal) and  possibly programmatic data.
 Using a combination of common sense and an examination of the economic
 literature in sold wast* and  other utilities would lead to  a list of variables or factors
that the modslsf bsisvss might tend to influence  the demand for solid waste
on the residential portion of the customers.

                                     III. 8

     A partial fist of variables in a demand equation for sofid waste collection
     might indude:


       o    the price for coiectiorVdisposal services
       o    income
       o    family size
       o    price of recydabtes
       o    rainfall or other weather/climate variables
       o    population
       o    other


       o    price for coBection/disposaJ services
       o    price of recydabJes or other options for diverting waste
       o    rainfall or other weather/climate variables
       o    number of employees
       o    type of business
       o    other
As mentioned before, there are a multitude of other variables or different forms of
variables that could presumably have an effect induding population, age distribution
of the population, the strength of the local recycling alternatives, etc.  Which
variables will turn out to be significant in any specific jurisdiction will depend on a
number of factors, including which data are available for the necessary time period.
the functional form that is estimated, the quality of the data, and the time and staff
available for the estimation work.

Generally, we would expect that the relationship between the price of disposal and
the tonnage or volume disposed would be an inverse relationship.9  That is, as rates
    3 Most jurisdictions that have estimated demand equations for residential cdieocr
and  disposal use some  measure  of average price for the  service levels.

                                     III. 9

 go up, waste reduction and recycling would be encouraged, and the amount of
. tonnage left over to be disposed of would be lower.  An empirical relationship of this
 type may be difficult to estimate in a jurisdiction that has not experienced a true
 price or rate before, especially as prices have not traditionally varied with amount
 disposed.  As variable can rates are introduced, we would expect that rates would
 have a much bigger effect on the amount disposed.

 For jurisdictions in this predicament there are several options. The jurisdiction may
 choose to  'adopt' a relationship from another jurisdiction.  Alternatively, they may
 decide that for the first year or two, the effect of prices will not be as significant
 because customers are just getting used to prices, and it will take time to modify
 their behavior.  The Appendix at the end of this section includes a summary of two
 models of  demand  for residential services that may be useful.

 Many of the needed types of socio-economic and other data are currently collected
 and being  used by your local electric, gas, or water utility for its forecasting work.  It
 would likely be very fruitful to have a discussion with forecasting staff from these
 utilities in data collection efforts and  planning the solid waste rates work. Many of
 the same types of models are very applicable to the solid  waste arena.


 This section is dosety tied with the previous estimation of solid waste tonnage or
 volume by sector.  The estimation of garbage disposed wiB generally include a price-
 or rate-related variable (and may or may not include a variable explicitly reflecting
 recycling).  This price variable reflects the amount that garbage tonnage or volume
 decrease as the price of disposing of the waste increases. The variable represents
 the net of two effects: a generation effect reflecting the fact that people might
 purchase items with less bulky packaging or fewer items in general;  and a diversion.
 or recvdinQ effect, reflecting the amount of tonnage or volume that is diverted to
 recycling activities.

 Because the  relationship described above is estimated using  historical data, the
 relationship cannot  account for any new, convenient recycling programs that may be
 introduced by the jurisdiction or by private industry.  Rather, it represents recycling
 and  waste  activities that were induced through historical rates and programs.  New
 programs wi generally represent a significant enough Changs in the system that it
 cannot be  accounted for through a historical modelling approach. In the case of
 new programs, it wi be necessary to develop separate estimates for the amount of
results using the preferred measure, the 'marginal' cost for additional service levels.
have not been as strong. Work is continuing Hi this area-

                                     Ill. 10


     Assume a hypothetical solid waste jurisdiction
     that, based on historical information, estimates an explanatory relationship for
     residential tonnage that takes the following form:

      Annual residential tonnage disposed per household =
                    constant term
                  + (a x change in average rate)
                  •f (b x growth in income)
                  + (c x household size),

      Assume the specific relationship ts as follows:
                                 ; b«+0.60; c»+0.70
      Residential tonnage disposed per household for 1989 * 0.82
            + (-0.14 x ($156/yr-$144tyear)/$144/year»
            + (+0.6 x ($29,OOQ/yr-$28.500/year)/$28,500/year))
            + (+0,7 x (2.01ppn-2.0pph/2.0pph)}.

      This equation woufd lead to a forecast of tonnage disposed per household
      for 1989 of:    >;   ;.;;> •..%****, •'-.                 ^ ••••-. •   '.   • }.->.

                  J& tons - {,14* 083) + (.6* 0175) + (.7*.02) «
                  J33 tons per household,
      9 the jurisdiction predicts 438.000 residential households, then the total
      projected residential tonnage is 365,000 tons per year.
programs wifl generally represent a significant enough change in the system that it
cannot be accounted for through a historical modelling approach.  In the case of
new programs, it will be necessary to develop separate estimates for the amount of
tonnage or volume that is expected to be diverted to the new programs.

Estimates of tonnage or volume that will be gathered by each additional new
program  will need to be developed. This work is not conceptually difficult, although
care will need to be taken to examine each program individually, and to develop
estimates that pay attention to the waste composition to assure that the programs
do not forecast more tonnage  diverted for any particular waste stream component
than is in the original waste  stream.

     The new estimate of tonnage to be disposed of by service wff consistof the
     net of two numbers:

      Final             Estimated      Estimated Tonnage
      Tonnage     *  Tonnage    - Diverted by Additional
      Disposed         Disposed      RscycBng Programs
Unfortunately, a multitude of factors will affect the amount of tonnage or volume that
will be collected by the new programs, and there is no hard and fast rule or existing
relationship that will give a number for the amount that will be diverted. The
information in the Table on  pages 1.46-47 in Part I of this document "Feasibility" may
prove helpful on this  point
     The estimate of program recycling tonnage wi be based ore

      o    Total amount of the matenaf in the* waste stream   •
      o    Achievable tomage
    :  o ••..-• Ramp up pattern- ^~ :-"y' '•*•' '"•'••
                T^»-~: *   .. . .-./«.. SVf -1: ••-.- •. . •• •'•
In more detailed steps, the estimate of recycling program tonnage will need to be
butt up based on a variety of factors, most of which wi vary based on the design
of each individual program, such as:

  o    the number of customers eligible for the program (this includes determining
      the targeted customer sector).
  o    the total amount of tonnage or volume of that type of waste that is in the
      disposal waste stream for that sector (based on a waste stream composition).
      This mutt take into account the effects of other existing or planned programs
      affecting the same component of the waste stream.
  o    the 'effectiveness* of the program (how much of the total amount being
      disposed wi likely be diverted  by the program).  This consists of two parts:
      1) participation, the percentage of eligible households that can be expected to
      participate, and 2), the volumes per household, or the 'efficiency' or amount
      (or percentage) of the waste that is actually diverted from each average


      participating household. These will be affected by the convenience of the
      program, the likely cooperativeness of the customers, and the amount of
      funds and effort that will be put into public education, advertising, and
      program promotion.
  o   Information on these factors will need to be estimated for both the long-term
      program, as well as the "ramping-up" period.  The expected pattern of the
      ramp-up will need to be projected. This again may be based on
      advertisement as well as physical factors or limitations (e.g., only so many
      special containers can be delivered per month, etc.).

Illustration:  A program is designed that will provide curbside collection of separated
            yard waste for single-family residential customers.  Assume yard waste
            makes up 20% of the residential waste stream  that has been forecast
            at 1000 tons per day (or 365,000 tons per year), and that single-family
            households make up 60% of the households in the city, and 85%  of
            the City's residential buildings.  It may be reasonable to assume that
            the amount of yard waste is more closely related to the number of
            buildings  (i.e. "yards") than to the number of households.   Therefore,  an
            estimate  might be that 85% of the yard waste is attributable to single
            family households.4  Making these assumptions would imply  that a total
            of about  170 tons per day, or 62,000 tons per year, of yard waste is
            eligible for this program (365,000 x .85 x .2).

            Assume that a big promotion is planned, or that a very low or zero rate
            is proposed for the program (and that regular  garbage rates charge
            significantly more for additional waste), or that  the program is planned
            to be mandatory. Assumptions like this would tend to  lead to an
            expectation that the program would achieve a  very high participation
            and efficiency rate.  In addition, if it is assumed that the customer does
            not have to sign-up, or if no special containers or bags are needed
            and waste can just be left out for collection, then the program may be
            expected to ramp-up fairly quickly (with few constraints).

            Making assumptions on these factors - for example that  in the  first
            year, 70% of customers sign-up and are about 80% efficient in getting
            the waste separated  - would lead to a result of about 35,000 tons
            collected from the program in the first year (62,000 eligible x .7 x  .8  =
            34,750).  Assume a rapid ramp-up period.  Assume by the second
    4 Additional information that your jurisdiction may have on relative lot  sizes,  or
information on  the type of yard waste or seasonal factors should all be taken into


             year, we have 90% participation and 90% efficiency, and that we never
             get much higher participation or efficiency.  We would then apply these
             percentages to the forecast for the second year of the program, and
             so on.

             The  tonnage diverted for each year based on this program would be
             calculated as:

                  program tonnage diverted * total sector waste stream x
                  percentage  of targeted material in waste stream x
                  percentage  for eligible sector x percentage participating x
                  assumed efficiency.
             The  new forecast for the tonnage disposed for the residential sector for
             the first year would be the  disposal forecast minus the diverted
             tonnage forecast for each program.

             Disposed tons  -  365,000 tons-(365,000 x .2 x .85 x .70 x .85 ) •
             tonnage diverted by other programs.
Applying this methodology to each program requires making several assumptions
for each program. Some may ramp-up quickly to high diversion levels, others may
require assumptions  of slower "phasing in" (either because of physical constraints, or
the need for extensive education of the public, or because of lower program
convenience). Some programs may focus on waste that is more difficult for
customers to separate, and these programs may never reach very high efficiency

Each program wiU need to be analyzed on this basts. Although the work seems
overwhelming, the concept it not difficult9  In addition, the staff from the
    9 Nota that this same type of analysis can be used in determining which types of
diversion programs to propose.  The tonnage that would be diverted, and the costs
that would be incurred, can be compared with the costs of traditional disposal ("avoided
costs*} to determine which types of recycling/waste reduction programs will be cost-
effective for the jurisdiction to undertake.  In calculating the cost-effectiveness, a long-
term perspective should be  adopted.  A recycling program  win likely incur more up-
front fixed  costs than continuing traditional disposal methods.  However, traditional
disposal methods have large fixed costs in later years (some jurisdictions would incur
these costs later than others). Comparisons should not be dona for too short a time
period so that it can mom fairly reflect these vary real costs.  For more information on


 conservation program department of your local electric or water utility may be very
 helpful6. There is a high degree of similarity of techniques and objectives for
 conservation of the commodities sold by these other utilities.

 Tonnage or Volume Overlap:

 One additional complicating factor needs explanation.  The previous  discussion
 provided an estimate of program tonnage. However, the amount of  recycling
 tonnage that the jurisdiction sees will be a combination of the new program tonnage
 plus any tonnage that is diverted from existing recycling  efforts.  When the solid
 waste jurisdiction begins to introduce new recycling programs, it may see new
 tonnage or volumes that they never had to collect before.  That is, customers who
 used to recycle waste through a private recycling program may begin giving that
 waste to the jurisdiction's recycling program.7  This is especially likely to happen if
 the solid waste jurisdiction offers a program that is particularly convenient, or begins
 to offer credits off the bill for participation in a jurisdiction-sponsored recycling
 program.  It will  also be more  likely if the jurisdiction's recycling program targets
 materials that are currently being collected through other means.

 This means that a simple subtraction of the estimated program tonnage from the
 forecast solid waste tonnage will underestimate the total  (garbage plus recycling)
 tonnage that the utility or jurisdiction will need to handle. In particular, the recycling
 program will likely achieve more tonnage than projected  (or at least will get  "credit1
 for more tonnage than it should) because it will divert tonnage from  existing
 recycling programs.

 Later portions of the rates analysis, particularly the revenue requirements section,
 uses projections of the total tonnage or volume collected by each program and
 customer sector in order to calculate total costs of the system. The module needs
 to know the tonnage or volume collected by a program to calculate  total costs of
 the program.  Information on both the new tonnage that is attributable to the
 program as well as the  amount of tonnage that is diverted from previous  or private
 efforts  are also needed.
cost effectiveness of recycling programs, see Part III of this report "Economic Feasibility
of Waste Diversion Incentives".

    6 or the literature in professional and trade journals related to these industries

    7 In a sense, it is as though the jurisdiction had underestimated the total potential
volume of particular  waste stream components  that could  potentially come  to  its
program because the material had been diverted from the waste stream previous^


 This section may or may not be necessary, depending on the manner in which
 tonnages have been estimated. The purpose is to allow total system costs to be
 separated into costs attributable to the separate groups and rate classes or
 subclasses that the solid waste system may have. The information presented here
 is used in module 3, the "cost allocation" module.

 For example, depending on how rates will be charged, it may be necessary to
 separate the amount of tonnage for the residential sector into variable can vs.
 dumpster tonnage, as well as into the amount of tonnage generated  by single-family
 vs. multi-family customers.

 There are a number of ways in which this separation may be conducted. For
 example,  "sharing out" tonnage based on the relative numbers of households may
 be a fairly straightforward method of estimating tonnage by sector. This may be
 used "straight", or may be modified based on other information. For  instance, there
 is some indication that multi-family households may dispose of less waste per
 household than single-family households (perhaps attributable to smaller household
 or yard size).  Therefore, a modified per-household  approach may be used.

 The separation may be  based on an average weight per  cubic yard of dumpster
 service  and adding up the cubic yards of dumpster service used by the jurisdiction's
 customers.  This tonnage would be subtracted from the total sector forecast with
 the remaining tonnage  assigned to the variable can customers.  Other alternatives
 may also  be used.1

 This type  of exercise would generally be performed for each type  of customer and
 each type of tonnage (for instance, garbage, recycling program 1 , recycling program
 2, etc.).  Given a shortage of time or information, averages or a number of
 simplifying assumptions may, of course, be used.
    9 Seattle's rate study used a number of equivalencies to separate  tonnage by
customer sector and to calculate the  rates.  These numbers  were based on  limited
information,  informal surveys, or  some  literature  review.  None of the  numbers is
irrefutable, and the numbers in other jurisdictions may vary based on waste  composition
and a number of other factors.  Equivalencies used included 100-135 pounds per cubic
yard of residential waste; Q2 "cans"  of waste per cubic yard container; 20-22 pounds
per "can" of wast*.


                       OR PURCHASES OF BAGS/ TAGS

The purpose of this section is to use net garbage tonnage by customer class and
rate effects to determine the number of cans  that will be subscribed to, or bags
that will be purchased by the residential customer dass.  In addition, estimates of
the number of participants for programs for which revenues will be collected must
be estimated.  This section poses a particularly sticky problem for the solid waste
jurisdiction that has not previously had variable rates.
Bag/Tag systems:  This is not a particularly complex assignment under a bag
system. Estimating the total number of bags to be sold would generally involve
forecasting total residential tonnage and dividing it by the  average expected weight
per bag/tag.9  For purposes of determining rates, it is generally not important how
many bags or tags are put out by a particular  customer each week. There is
generally no variation in price based on the number of bags used, so although the
level of revenues is tied to the number of bags sold, no variation in separate bag
rates needs to be calculated.  However, because of the more complex (or flexible)
rate  structure that is used under a variable can system, the calculations require that
the distribution of the number of cans subscribed per household be known.

Variable Can  Subscriptions:  For jurisdictions implementing a variable can system,
not only will starting subscription levels be needed, but assumptions will also need
to be developed that lead to estimates of how the starting subscription levels will
change over time given two important factors:

  o   changes in the rates, and
  o   changes in tonnage.10

The  reason this is a critical section is that  the revenues for the residential sector
under a variable can rate structure are intimately related to the number of cans
    9 This sounds fairly straightforward, but there are complications involved.  It may
not be known how full customers will fill the bags a priori, and the amount of material
that they may put in the bags (and their incentives to compact the waste) may change
over time.  This could be a factor of getting used to the system, rate incentives, etc.
So  the average weight may not be known at the beginning of the program, and the
average weight per bag may change over time as the program matures.

    10 This could be due to recycling programs. Other changes that would affect cans
subscribed would include the introduction of new service levels  or service options, etc.


, charges through property taxes, only two basic items are required:  residential
 revenue requirements and a forecast of the number of households.  Forecasting the
 number of households in the service territory is considerably less complicated and
 risky than generating a reliable forecast of the  profile of cans subscribed for
 residential households. This means that collecting total revenue requirements will
 generally be less certain when a variable can structure is introduced than under the
 fixed rate scenario.
                                   Subscription Levels Over Time
However, the task is
not impossible.  Also,
with some extra work,
the approximate range
of the risk can be
Figure 2 shows the
pattern of subscription
levels over time in
Seattle.  Clearly,
Seattle's customers
selected very high
service levels in the
earty years of tha
variable can program.
This is partly because
tha subscription laveis
available were weighted
fairly heavily toward
high laveis, tha default
service levels were sat
high, and because
there were large
increments between tha
subscription levels
available.  In addition, tha rate (avals ware relatively tower in tha early years
incremental rates charged for additional service levels were fairly low.
                      1968  1989
                               (S3 1toCm
Q3 Orate
• Fourorim
                         Figure 2
                                                                       ,  and the
Subscription levels dadnad vary quickly with increases in tha base rates, and
increases in tha relative amounts charged for additional cans.11  Savaral factors
allowed ttts change.  Ona of tha major factors was dacraasing  anforcament of
    11 A table of Seattle's residential rates during this period is included m me case
study at tha and of this volume.

 increases in the relative amounts charged for additional cans.11  Several factors
 allowed this change. One of the major factors was decreasing enforcement of
 service levels.  Another was the increase in recycling through private recyding firms
 during this period.  Third, the Utility began to offer more service levels, with smaller
 increments between the levels offered.

 Seattle's  example is provided to illustrate the fact that the  starting service levels, as
 well as the way in which the subscriptions will change over time, will be influenced
 by how the variable can system is set up and the current solid waste characteristics
 of the  jurisdiction.  Influential factors include:

  o    the average amount of waste currently put out  by customers,
  o    the amount of recyding currently being done,
  o    the service level  choices offered to customers and the increments between
       service levels,
  o    the level  of rates and the steepness of the rate structure (the amount charged
       for extra  cans),
  o    the degree of enforcement of service levels, and
  o    the "default" service level for customers who do not specify a service level.

 Starting Levels: The first step in estimating the starting subscription levels is  to
 estimate  an average number of total cans that will be subscribed.  A method that
 may provide  an estimate of this would be to estimate an average weight per
 garbage  can. Then the net garbage tonnage can be turned into  an estimated total
 number of cans.  All households would have to subscribe to at least a first can of
 service, and the remaining step would be to dedde on the distribution of these
 "extra" cans among can subscription  levels.
Subscription Adjustments: After the initial or starting subscription levels are
determined, certain amounts of judgment are also necessary and appropriate in
determining the amount by which subscription levels may be further modified with
respect to changes in rates and tonnage levels.  With the lack of historical
information in a jurisdiction, judgment may be as valid as any alternatives.

Change mechanisms may be as non-empirical as assuming that, for example, 50%
of customers with more than one can will reduce subscriptions by one service  level
The assumption may be that the amount that subscriptions will change is higher tor
higher subscription levels and  lower for first and second cans because there is more
    11 A table of Seattle's residential rates during this period is induded in the case
study at the end of this volume.

     Several things can be done by the jurisdiction to determine starting variable
     can service levels.

       o    The jurisdiction could conduct surveys or focus groups of customers
            to ask the level of service they would subscribe to given a series of
            rate scenarios and service levet options.
       o    The solid waste jurisdiction could conduct visual inspections of the
            amount of  waste put  out  at households and use those (or
            modifications of those) as starting distributions.
       o    Alternatively,« distribution from a jurisdiction that is judged to be h
            sfrnSar circumstances could be used.
 room for reduction. That is, you might assume that customers on higher cans will
 tend to reduce their subscriptions more than those on lower cans because such a
 change involves a smaller percentage reduction and because they may face bigger
 increases in rates. Therefore, your adjustment mechanism might show greater
 proportions of adjustments  at higher can levels.

 More complex adjustment mechanisms would have separate adjustments based on
 at least two subscription drivers: tonnage changes and rate changes.  The model
 could first adjust the overafl subscription levels for changes in the amount of net
 tonnage due to either recycling programs or other effects. The total cans are
 assigned as "first cans* and "extra cans" based on dividing the net tons by an
 average weight per can and knowing the number of customer households.  Another
 approach would be to reduce a larger proportion of high subscription levels to take
 account of the fact that reductions in higher subscription levels should be easier.

 A second adjustment  could then be made based on previous subscription levels
 and rate effects between  various can levels.  This would require elasticities for each
 can level - that it, a numerical estimate of the reaction of customers at each
 subscription level to a rat* change.  Empirical work based on other situations may
 or may not lead to more  accurate estimates than using judgment-based
 assumptions.  However, preliminary work from Seattie is included in the Appendix to
this section.
Judgment is an important factor in these analyses.  With significant changes in
solid waste system, empirical work may not be very useful.  Judgment may be aJi
that is available until the new system is in place for a tuns and site-specific empirical


 information can be collected.

 Bisk associated with subscription level forecasts;  One very real option to increase
 the revenue reliability associated with a new van; :>le can system is to set up a rate
 structure that does not charge vastly different rates for different can levels.   In
 simple terms, this means coming dose to charging an average amount per
 household again, but gives both the jurisdiction and the customers some time to
 adjust to the new system.  For instance, if the fixed rate per household previously
 was $7 per month (assuming the same total revenue requirements for this sector),
 the new variable can system may start out  by charging $6 per month for the first
 level of service, and only one dollar more per additional can.  This would tend to
 increase revenue stability, and would increase the certainty that revenue
 requirements would be collected.  However, it significantly decreases the recycling
 incentives associated with the variable can  rates.  Another option is to secure the
 costs by giving the jurisdiction the ability to use general fund revenues  for shortfalls.
 One other approach is to test the revenue effects of a number of scenarios for
 subscription distributions when calculating the  rates.  Using both pessimistic and
 optimistic assumptions may help the jurisdiction 'bracket*  the financial risk.

 Given the possible financial uncertainty associated with the introduction of variable
 can rates, this kind of a phase-in may be a way to make the change in rate
 structure more palatable to policy-makers and to customers. It meets the general
 equity criteria that customers who dispose of more pay more,  and that customers
 who reduce waste can pay tower bills.  As  time passes and the concept of varying
 rates  becomes more acceptable, customers become better educated about
 alternatives, the jurisdiction gets better knowledge of customer behavior, and more
 programs are introduced, the rates can be  modified to include stronger recycling


 None of the sections of the analysis are "stand-alone".  Rather, each includes a set
of relationships that depend on answers that  are generated in  other parts of the
analysis.  The demand module generates estimates of tonnages and service types
and other results that are used  in several other modules  of the analysis. In addition,
the rats design part of the analysis will generally feed back into the tonnage
forecasts generated in the demand equations described above. After all sections of
the rates analysis are completed once through, the levels of rates estimated in the
last part wfl be used in the demand equations to generate new, revised estimates of
demand for the various services.  These  new estimates will then be used in the next
run through the various parts of the rates analysis.


 This step analyzes the costs that would be incurred meeting the demand for the mix
 of services projected or forecast in the demand analysis.  It attempts to estimate the
 total amount of revenues that need to be collected from all sources, including rate
 and  non-rate revenues.
     The revenue requirements analysts is based on the sum of aj expenditures
     that are needed to meet the demand. The analysis includes three steps:

       1)    Estimating afl non-varying costs associated wfth serving the forecast
            demand, including any planned costa for system improvementa, start-
            up costs for |CifO£p'AiTi&, overhead, etc.
       2)    Estimate cost relationships associated with serving the service needs
            that wl vary  based on the amount of service provided, or the
        '    customer counts* or revenues.

       3}    Determining whether revenue requirements need to be increased: to
            meat any financial poldes or gutdeinas.
The revenue requirements analysis needs to include every cost associated with
running the agency and providing service because the rates that are calculated must
produce enough revenue to cover those costs.12

For each current-type cost center identified by the solid waste jurisdiction, estimates
of all types of costs wiB need to be determined.  This includes generating estimates
of the level of costs that are relatively fixed as wen as formulaic relationships for
those that wi tend to vary with the amount of forecasted service determined in the
    12 To the extant that an agency mignt have some costs covered out of tne general
fund or taxes, a total revenue requirements analysts would stifl probably be needed.
However, if it is known that only some costs would need to be covered from rates, a
partial revenue requirements analysis could be performed.


 demand section.13  The estimated proportions of costs that are fixed vs. variable by
 cost center will also be used later in the cost allocation work.

 Some of the costs will be fairly fixed, others more variable.  For instance, the cost
 for internal labor and overhead may be fairly fixed.  Some costs will vary only by
 inflation or not at all. Others will vary with tonnage, ton-miles, customer counts,
 programs, revenues, or other variables.  Costs and relationships will vary based on
 the types of services provided by the jurisdiction.  A careful analysis of the specific
 solid waste system will be needed to assure that any and all important cost-related
 relationships are included in determining the total of revenue requirements.

 Once it is determined which types of costs vary and on what grounds they vary, the
 jurisdiction needs to determine how much of some of the factors is variable:  e.g., it
 may be that only some portion of some costs may vary with tonnage or inflation.
 Special  relationships may also need to  be set up because costs that may increase
 with increased tonnage may not  move downward with decreases in tonnage ("sticky
 downward").  For example, over the short term, the number of  municipal jobs is
 generally fairly sticky downward (and upward) regardless of the tonnage that may
 be collected or the services provided.  However, some labor costs may be variable
 with respect to demand, particularly items like overtime and temporary labor.

 Other cost components that may vary fairly directly with the demand estimates
 provided from the demand analysis may include, for instance, disposal costs at a
 contracted landfill, or components of trucking operations (e.g. fuel costs). Another
 example is contracted services.   Another example  would be any contracted
 programs that with payments based on the number  of tons collected.  The level of
 taxes will tend to vary in a formulaic relationship with the level of revenues or income
 that the solid waste jurisdiction anticipates.

 It may also be necessary to determine  which items are variable in  short term vs.
 long term, and take that into account based on the period over which the revenue
 requirements are being estimated. Economists usually assume that ail costs are
 variable in the long run.  In the short run (less than three years), capital
 expenditures are usually considered 100% fixed, and 100%  variable in the longer

 One method of proceeding.is to examine the historical pattern of budget items one
 by one  over time. This may help deduce which portion of costs is variable, what it
    13 For instance, one assumption may be that 90% of a particular type of labor is
fixed, and 10% is variable based on tonnage. Or it may be assumed that all overtime
is variable,  and "kicks in" if tonnage exceeds a certain amount


 varies with, and which costs have risen with inflation, slower than inflation, or have
 outpaced inflation.

 In some cases, the costs for the next years will be very closely related to previous
 years, and be simple functions of historical levels.14  However, the introduction of
 variable rates may lead to significant changes in levels of expenditures required
 within specific cost centers (including possible increases in customer service and
 billing costs, and other items).  In other cases, the system  changes will create totally
 new types of costs that will be less simple to estimate.  New cost centers may need
 to be added to cope with the  new variable system or the new recycling programs.

 The change to a new system may also precipitate new  capital expenditures,
 especially likely in the areas of billing and recycling programs.  Or the need for new
 investment may be created by  the change in service mix or increased/decreased
 levels of tonnage collected.  For instance, the addition of recycling programs may
 require the construction of a recycling processing center, or a special recycling
 collection truck.  Estimates of these costs and the relationships with service, inflation,
 and other factors will need to be included in the analysis.

 Estimates of the amount of capital expenditure to be apportioned to each year of
 the investment is usually some version of the total cost  of the investment19
 apportioned across the number of years of useful lifetime of the investment1'  In the
 case of the processing center,  the lifetime may be 20 years, or for the truck, the
 cost of the truck would be divided by the useful lifetime of perhaps 7 years to
 calculate the annual cost

 The final step is to determine whether the financial guidelines that may govern the
 solid waste jurisdiction will be  met by the combination of revenues and expenditures
 that are projected  However, the final projected revenues are a function of the rate
 design given in the last part of the schematic in Rgurt  1 and the services
 demanded based on the first part of the analysis.  Therefore, the test of whether the
 policies are met wi need to be established as formulas in  the analysis.

 Examples of the types of poldss that might govern the financial operations include
 debt/equity ratios, minimum number of days of operating cash, and minimum net
 income requh'SuistitB.
    14 For example, costs that win increase with inflation levels.

    19 Possibly the cost of the investment less any salvage value, if appropriate.

    1* Some alternatives would be tc jase the yearly costs on a straight-line method,
on the tonnage expected to be served each year of the lifetime, etc.


tt will be important to perform a fairly thorough analysis at this stage if the  "
jurisdiction wants to be able to retain a great deal of flexibility in the next stages of
the analysis - cost allocation and rate design.  Any part of a cost item that you
might want to allocate separately to a group of customers to make sure they pay for
it will need to be included separately. For instance, if only customer group A visits
the transfer station at night, then the relevant transfer station costs will need to be
apportioned by day and  night costs  so the night costs can  later be allocated to the
proper customer group.

Tend not to vary:         budgeted staff including direct and indirect labor,
                         overhead, fringe, travel, education, dues and
                         memberships, subscriptions
Tend to vary:             some labor costs, including staff,  temporary, and overtime
                         in certain operational areas, including:  customer service,
                         inspection, collection staff, recycling program staff, transfer
                         station staff, hauling/drivers, landfill/incinerator
Supplies, Equipment & Services:

Tend not to vary:         budgeted office supplies, equipment and maintenance,
                         office space and services, basic telephone, postage,

Tend to vary:             equipment at transfer station or hauling equipment
                         (leasing/rental), fuel, maintenance, phones or other
                         equipment for customer service, inspection, collection staff,
                         transfer station staff, hauling/drivers, landfill/incinerator.
                         operating supplies for landfill/incinerator, cans/bins for
                         garbage or recycling  program collection
Expert, Consulting, or Contracted Services:

Tend not to vary:         budgeted planned studies and assistance


Tend to vary:            public information/advertising, data processing services,
                        recycling market development, recycling or program
                        services or support, any contracted collection, hauling, or
                        landfill or incinerator contracted services (e.g. tip fee)

Tend not to vary:        capitalized equipment land, principal and interest
                        payments, depreciation

Tend to vary:            taxes, subsidies to low income customers, net income or
                      ' other financial targets, some depreciation
This is just one method of breaking down the costs, and is based on a budget
approach.  Another method is to separate out the costs.by functional area:

A fist of examples of cost centers associated with current expenditures might

  o    Residential collection
  o    Transfer station operations
  o    Landfill, incinerator or other disposal operations
  o    Transportation/HauBng
  o    Blfing
  o    Customer service
  o    Recycling program operations
  o    General and Administrative
  o    Taxes
  o    Interest
  o    Other

Types of costs that wifi be included in current expenditures include 1} internal
labor and overhead, 2)  outside labor, and 3) other current expenditures.
Examples of cost centers associated with non-current expenditures include
capital expenditures for the following types of items:

  o    Garbage coflection (trucks, etc. if munfcipai collection)
  o    Transfer station modifications/irnprovet nent&
  o    Recydng program Divestments
  o    Bttng (new computers, etc.)
  o    General and administrative (computers, equipment, etc.)
  o    Landfldosure


The relationships included in the revenue requirements analysis depend oh
information generated in several other modules, including tonnage figures from the
demand portion, and for the test of financial guidelines, the revenues generated from
a combination of the demand and the rate design section.

This module determines the way in which the total revenue requirements of the
system will be borne by the solid waste jurisdiction's customers.  It generally
attributes costs and non-rate revenues to each customer class served based on the
type and amount of service delivered, and assigns costs both between  rate classes,
and within rate classes.

In order to begin the cost allocation work, the jurisdiction must define the general
customer rate classes. Then, the costs from each of the cost categories in the
revenue requirements analysis (plus any non-rate revenue categories such as
interest revenue, etc.) must be apportioned to the rate classes in a way that covers
the entire costs.  Some of the cost categories should be broken up into smaller
entities, depending on whether particular subcategories of costs are generally
attributed to one particular class of customers.

Generally, the costs that are used in a rate analysis are the same as budgeted
costs,  and the same basic analysis that goes into establishing the budget is that
used in a rate analysis. First the operations will  generally  be broken into a number
of cost centers17. Depending on the type of services provided by the solid waste
jurisdiction the general cost centers will differ.  However, all costs of providing solid
waste  and associated services must be accounted for  in this analysis.

Some  of the cost centers will be associated with  current expenditures (those
associated with items with a useful lifetime of one year or less), and some will be
associated with non-current expenditures (those with useful lifetimes of longer than
one year).

Note that cost allocation includes a great deal of  judgment  The way in which costs
vary precisely based on which customers is often far from dear.  A variety of
allocation methods are available, but there are also discretionary and policy factors
that may come into play.  Examples are given below, but the ultimate allocations for
a jurisdiction must reflect information about its specific service and  customer
patterns, and its policy and rate design objectives.
    17 "Cost Centers" are categories into which costs are summarized.  For instance.
costs centers might be labor", or "transfer stations".


 Tne cost allocation process generally proceeds in two steps:

 3.1)   assignment of costs between rate dasses, and
 3.2)   assignment of costs within rate classes.

For each customer/service group or rate class (and subcategories) the cost
categories16 are assigned by one of several possible allocation methods.  Costs
might be allocated on the basis of the number of customers, number of households,
tonnage, proportionally, or some other method.19  The result is a three-way "between
categories" allocation matrix.  An example of a "between rate classes'1 allocation
matrix from Seattle is presented in  Table 1.  However, keep in mind that this
allocation will not be appropriate to other jurisdiction's situations.

The  solid waste cost categories that were derived in the revenue requirements
section are generally aggregated in slightly different ways for the cost allocation.  In
this section, the costs may be re-aggregated into categories that reflect "packages"
of assignable costs.  The breakdown needs to be fine enough to allow the
assignment of appropriate costs to specific customer groups. For example, this
might be grouping costs into categories like  transfer stations.  However, to continue
the previous example, if only one type of customer visits the transfer station at night
and  the jurisdiction believes  that customer group should bear the cost burden of the
night hours, then the costs at the transfer station will need to be broken down into
day vs. evening costs.

Assignment methods for all rate classes and all cost (and non-rate revenue)
categories must be competed in the cost allocation section. If, in the rate design
    " and non-rate revenue categories

    10 Economists would tend to allocate costs via one of two basic methods:  1) an
average cost based method, or 2) a marginal cost based method. The simpler method
is based on average coats, with the costs generally calculated as one of two  types:
those that should be apportioned on the basis of 1) tonnage for the class,  or  on the
basis of  2) the number  of accounts  represented  by the class.  The  marginal  cost
method would base the assignment o.' costs to mimic the cost of the last unit of service
provided This method would generally lead to rates that are more progressive, but
requires considerably more data and analytical work on the part of the jurisdiction and
is a complication that will not be addressed in this report


 module, it is decided that some rate classes will pay subsidized rates and will not be
 required to  cover their entire cost-of-service, it will be necessary to allow for
 reassignments of the un-allocated costs to the other rate classes in the cost
 allocation module via similarly-established assignment criteria.20
Illustration:  As an example, Seattle defines its classes of customers as variable can
            collection, dumpster collection, transfer station auto traffic, and other
            transfer station customers (generally commercial).

            Seattle assigns its variable can collection customers costs in the
            following way.  Collection contract costs, transport and hauling,
            weekday portions of the transfer station operations, landfill closure
            expenditures, general and administrative, disposal costs, recycling
            costs, interest revenues, and depreciation are all assigned on the basis
            of the proportion of total tonnage assigned  to the variable can class.
            Billing costs  are assigned on the basis of the proportion of billed
            customers that are represented by variable  can customers.   None of
            the costs associated with the weekend operation of the transfer stations
            were assigned to the variable can customers because all transfer of
            variable can  tonnage occurs on the weekdays21. Similar assignment
            methodologies are determined for the other rate classes.  In Seattle's
            case, taxes22 are assigned proportionally on the basis of revenues from
            that sector, since they are revenue-based taxes.

The first stage of me allocation established criteria for assigning total costs to each
of several general customer groups.  For each of the customer categories and each
of the types of rates charged, the costs that were assigned to that customer class
are divided among the set of components of the rates.
    20 An example of a rate dass for which Seattle charges rates that are less than full
cost-of-service include special, subsidized rates for low income customers.

    21 The  bulk of weekend transfer  station costs are  instead  assigned  to  the
automobile self-haul customers.

    22 and the extra revenues required to meet the Utility's financial constraint of a 3%
minimum net income


          Tabto 1. Cunwt Afoctiton of Coftt/Nofv-ft** RcvwtMt P«*««o R«t Categories
Rccycmo/WttM Reduction
The next step ts to decide how each of the coat categories wi be aflocated within a
rate data.  In thto anaJysfe, if the rate design indicates that the customer's rates are
to ba mads up of several components, then the avocation matrix would need to take
this into account and assign coats to each of tha rats components.  For example, if
tha totaJ dumpstsr rate tor a particular customer daaa is to ba broken into a
component based on the number of customers, another baaed on number of
pickups, another based on dapoaaJ voluma. then the coat elements must be
         to each of these rats components.

 For some customer classes, rates are a simple "tonnage"-based rate.  That is, the
 jurisdiction may choose to charge landfill or transfer station customers may -be
 charged strictly by the number of tons brought in, and not an additional customer
 charge  or the like.  In that case, the costs that were assigned to the transfer station
 rate class (from each source) are not further divided into parts within the customer
 class  before the rates are calculated.  The costs are merely each allocated based on
 the calculated tonnage.  For customers with this type of rate design the final level of
 the rate is determined by dividing the total costs  (less non-rate revenues)  that are
 assigned to this customer class by the number of forecasted tons of service for the
 rate class.

 Other customers may have rates that are slightly  more complex, and may include
 both a customer charge and a tonnage portion,  tf a  bag system is used, and the
 charge is going to be a two-part structure (a customer charge and a per-bag
 variable fee),  then the total costs (by source) that were assigned to bag/tag
 customers would need to be disaggregated into the customer charge and bag
 charge based on  an apportionment methodology. One appropriate mechanism may
 be to assign  all billing costs to the  customer charge,  and to allow all other cost
 categories to be assigned to the bag price on the basis  of tonnage.

 For variable can customers, the rate structure may have  embedded in it several
 components,  and the manner of how they are apportioned affects the "steepness" of
 the rate design.  Generally, assigning a large portion  of costs on the basis of
 tonnage - and fewer on the  basis of the  number of customers  - will lead to rates
 that include stronger recycling incentives.  That is because fewer of the costs end
 up in  what is in essence  a "customer charge", and more will be assigned  to the part
 that is variable based on the number of cans subscribed.

 Several  examples of the allocation of revenue requirements within customer rate
 classes  are provided in Tables 2 and 3. The examples are from  Seattle, and are
 presented to  illustrate the methodology discussed above.

In order to maintain flexibility in being able to set rates that meet the jurisdiction's
objectives in terms of incentives and inter-relationships, it is important that the
analyst and decision-makers plan ahead and evaluate the plans for rate structures
Preparing mock-ups of these cost allocation rnd rate design matrices early in your
modeling will help assure that you have collected your costs and carried them
through the model in a sufficient level of detail (or disaggregation) to assure you
retain the most flexibility in apportioning costs in the way you want


          Tabto 2.  Allocation ot CosttvNon-Rafc RCVWWM WKhm Vartabto Cm Category
 Tnnrfar Slattern (w««kdayt)
  HdM Ctowra (inc. OftM.
  •nwt, dipr., ntrMt vcp.)


       f 989-90 SOU WM» AM SMy.
CoMOton (nat ot rwvaQ
This will require work and planning.  Achieving flexibility would argue that the costs
and rate components be highly disaggregated.  This allows them to be aggregated
in any number of ways to create and design rates. However, the tradeoff is that the
more detail and further disaggregation will require more work up-front  in collecting
detailed information on the sources of costs and understanding the system in more
detail.  However, it gives more flexibility in the way that costs can be assigned and
rates can  be designed.  It will also save a great deal  of back-tracking  if decision-
makers ask  for rate scenarios that might not have been included in the original rate


Clearly, there is considerable overlap between the latter stages of the  cost allocation
analysis and the rate design and rates calculations analysis. The amount of costs
allocated to  customers classes will vary as the amount of tonnage estimated in the
demand section changes.

     This part of the analysis performs two main functions:

       1)    determines  the form  and components of rates for the various
            customer classes and services, and
       2)    determines  relationships between rates that wfll be equitable  and
            provide for consistent incentives.
In this section, the solid waste jurisdiction determines which customer sectors will be
charged for service via a strictly per-ton rate, which will be charged on the basis of
number of visits, which will receive subsidies or penalties based on incentives, and
which win have rates with  other designs.  It will also  determine the structure of
subscription-based rates.  This is also where an analysis of policy-based deviations
from cost-of-service rates  may be invoked.
lustration:  For example, in Seattle, the list of the types of rates that needed to be
            calculated for services included:

  o   Variable can rates for each service level for curbside collection for the
      following customer groups:  1)  single-family; 2) multi-family; 3) single family
      low income; 4) multi-family tow income.
  o   Variable can rates for each service level for backyard collection for the
      following customer groups:  1)  single-family; 2) multi-family; 3) single family
      tow income; 4) multi-family tow income.
  o   Dumpster service for a variety of service levels, and collection frequencies.
  o   Subscription rates for the yard waste program
  o   Transfer station per-ton rates and minimum charge rates for the following
      customer classes 1) self haul; 2) yard waste; 3) charitable organizations;  4)
      household hazardous waste.
  o   Per-vistt rates for automobile customers at the transfer station
  o   Par-vis* rates for automobile customers at the transfer station for household
      hazardous waste cuitomen.
  o   Charges for optional or special services such as special pick-ups, bulky items,

       and other special fees.23

 As mentioned in the previous paragraphs, determining the level of rates for per-ton
 (or per-trip) customers is straightforward.  That sector's share of total allocated costs
 and non-rate revenues is divided by the number of tons (or trips) forecast for the
 sector, and the result is the per-ton (trip) rate.  For example, if the total revenue
 requirements assigned to the self-haul commerciaJ customers is $750,000, and the
 number of tons forecast for the self-haul commerciaJ sector  is 15,000, the per-ton
 rate would be $50 per ton.

 Rates must be assigned to all customer types and services.   They are calculated
 using results and relationships from the demand, revenue requirements, and cost
 allocation modules. Some will be based on actual cost of service.  Others will be
 apportioned based on formulas. For instance, it may be that multi-family variable
 can rates should be lower than single-family rates because the cost of service may
 be somewhat lower. Another example would be using a formula to determine the
 amount of the surcharge that should be charged for premium levels of service, or
 the discount that should be offered to low income customers. Rather than
 complicating the revenue requirements or cost allocation sections, a formulaic
 relationship between the rates calculations can provide this differential.24   Still other
 rates will simply be assigned  (particularly items that are too  small to model, or that
 represent pass-through charges).25

 Policy considerations will determine whether subsidies are appropriate for some
 customer sectors.  This may be based on a number of criteria.  It may be that a
 lower rate is desired for a segment of low income customers. It  may be that in
 order to retain a customer sector that has competitive alternatives, a rate that is
 lower than full cost-of-service is needed.  If these types of subsidies are employed,
the excess costs must be reallocated to other customer segments as part of the
 cost allocation analysis. Other examples of subsidies would be below-cost-of-
    23 Note that Seattle does not operate a landfill, so no rates are established for that

    24 For instance, based on policy considerations, Seattle charged a 40% premium
for carry-out variable can service over the curbside rates.  Qualified low income elderty
or handicapped customers received  approximately 50% off the standard variable can
rates.  In a change from previous rate calculations, the  differential between single-
family vs. multi-family variable can rates was eliminated.   For policy reasons, higher
subscription levels were priced above cost of service, and lower levels subsidized.

    29 Examples of these types of items might include small pilot programs or  pass-
through items like  replacement toters.


 service or zero rates for recycling services.

 Policy considerations may again be employed if the solid waste jurisdiction wishes to
 deviate from calculated cost of service to generate variable can rates with higher
 recycling incentives. In this case, the cost allocation methodology might be modified
 to either reallocate excess revenues that are generated from overcharging higher
 can levels, or to reapportion the subsidy given to lower can levels.
 lustration:   Seattle's variable can rates were designed to consist of three
             components:  a "customer charge", a "stopping charge", and a
             "tonnage charge".  The customer charge was defined to cover costs
             that are basic to the existence of a City-wide solid waste service, are
             not tonnage related, and are related to City policy.  For instance, the
             customer charge includes the cost of landfill closure, the cost of the
             low income subsidy (city policy), billing costs, the cost  of the recycling
             programs that are available to  all variable can customers.  AH variable
             can customers pay this customer charge.

             The "stopping charge" includes the non-tonnage related cost of
             Seattle's residential collection contract

             Finally, the "tonnage charge" generally includes  the tonnage portion of
             the residential collection contract, the disposal cost, transfer station and
             hauling costs.  Seattle wished to increase the recycling incentive by
             increasing the amount of rate on higher can levels. The extra revenues
             were then used to reduce the level of the rates for lower can levels.

 Evaluating Equity and Consistent Incentives between  Rate Levels*.

 Rate planners must work to insure that an customer groups  pay a fair share of
 system costs.  It may be that some costs, such as landfill closure cost, should  be
 borne  equally by afl the households in a city, while the cost  of stopping in a
 garbage truck should be paid on a per-structure basis.  Other equity issues include:

  o    Equity between single family and multi-family rates
  o    Equity between rates charged to different sized buildings
  o    Equity between dumpster and  can/bag customers

The analyst must examine the how sensible  are the calculated rates, and  how the
rates perform on the basis of the incentives  provided and equity considerations
before proposing them to management

    rate designs from this section are used extensively in the cost allocation section.
in addition, the rates calculated in this section of the rates deterrnination are cycled
back into the demand portion.

Because the rates determined in this  section are almost certainly not equal to the
rates that were used as starting values in the demand section, these new rates will
lead to different estimates of the demand for quantity and mix of services.  These
new levels then  are used in recalculating the demand, revenue requirements, cost
allocation.  Newty determined rates are used to adjust demand estimates until  only
small changes in the values of the projections are found between cycles.  At this
point, "equilibrium" is reached, and the cycling stops.

                                5.D  SUMMARY

The rates analysis described should be somewhat similar to the calculations that are
currently used to determine overall costs  of current solid waste service.  However,
the discussion attempted to highlight modifications that would be likely to be needed
with the introduction of variable can service. These  are concentrated in  the demand,
cost allocation, and rate design sections of the analysis.

One thing to remember is that judgment  is an important part of all of these
analyses.  Equations are  not a total substitute for "knowing* the particular solid
waste jurisdiction.  In addition, equations  are not good predictors when  significant
changes over historical operations are proposed.  In determining what will happen to
the solid waste system, consistent and "reasonable" assumptions should be made.
To the extent possible, lessons learned at similar jurisdictions or at other utilities in
your area should be used. However, be aware that your predictions will not be
"right" the first time. But  you  should also realize that the  predictions and
assumptions can be changed as the system evolves over time and as more
information is gathered.  The costs during start-up may be recovered in later years,
and in general, the  overall system will be fairer and more sound in the longer run.

                            APPENDIX TO PART III.


 Seattle estimated the following forecasting equation for  longer-term tonnage demand
 for residential pick-up and disposal service:28

  Change in annual residential pounds disposed per household-27

   Coefficient      Variable

            (constant term)
   -0.14     (the percentage change in the average price of disposal),
   +0.59    (the percentage change in household income),
   +0.72    (the percentage change in household size),
   -0.03     (the percentage change in the market price of recycled newspaper.
    28  Seattle's equation was estimated as a function of logs of first differences of
pounds per household. Equations for other sectors were also estimated. The equation
for automobile self-haul transfer station customers estimated the number of automobile
trips as a function of per capita income  and the auto rate charged  at the transfer
station.   Seattle's equation  forecasting  self-haul commercial tonnage  at the transfer
station was a function  of the tipping fee at competing regional transfer  stations, the
tipping fee at Seattle's transfer station, and the level of employment in the construction

    27 The estimated elasticities from Seattle's equations are generally the expected size
and sign. Generally, we would expect  that increases in  the price  of disposal would
tend to decrease the tonnage disposed. That is, as rates go up, waste reduction and
recycling would be encouraged and tonnage disposed would be lower.  This would
mean a negative sign on those estimated coefficients.  Increasing levels of household
income  and  household size  would  be expected  to  increase the  amount of waste
disposed per household, so these coefficients would have a positive sign. In addition,
the elasticity for household size is less than one, which implies that as household size
doubles, waste disposed increases, but by less than a doubling. The coefficient on the
recycling price may not be expected in other jurisdictions. Seattle has had a fairly
active private recycling industry for some time.


 The following equation was estimated by Robin R. Jenkins,20 using pooled monthly
 data from nine jurisdictions resulted in the following coefficients.

 Residential waste disposed per capita per day *

  Coefficient       Variable

   -0.10           (user fee)
   -0.00           (average household income, unlike the other variables, this
                  coefficient was insignificant)
    0.02           (mean temperature)
    0.04           (average precipitation)
   -8.36           (average household size)
    0.33           (age distribution of the population)
    0.004          (population density)
   -0.01           (price received for used newspapers)

 The Jenkins equation resulted in an elasticity with respect to user fee that was very
 dose to Seattle's (-0.1257 compared to Seattle's  estimate of -0.14).
Preliminary work in Seattle indicated that customers on lower subscription levels
showed a lower propensity to change with changes in rates. This is party because
there were few lower subscription levels available to them, and partly because the
percentage of waste that would need to be recycled would be much higher in
moving from 2 cans to 1 can than from 4 cans to 3 cans.

In its 1989/1990 rate study, Seattle developed a set of elasticities to approximate the
reaction of customer subscriptions to changes in rates for each variable can
subscription level.  The study used the following elasticities.

      One can to zero can:  -0.01
      Two cans to one can:  -1.00
      Three cans to two cans: -1.53
    " Jenkins, Robin R, Municipal Demand for Scfld Waste Disposal Services:  The
Impact of User Fees. Ph.D. Dissertation, Draft December 1989, University of Maryland,
College Park, Maryland.


       Four cans to three cans: -2.05
       Five cans to four cans: -2.14

The Utility had only aggregate subscription levels on which to base its estimates -
that is, it knew what percentage of customers were subscribed to which service
levels before  and after rate changes. This made the estimation difficult, because no
data were available on the actual subscription changes made by any particular

Utility staff had to make simplifying assumptions in order to make any use of the
admittedly poor data available.  The first was that customers generally switched
down only  one service level.  The staff also assumed that no customers switched
"up" in service levels.  This allowed the utility to "back out" the percentage of
customers that must have switched  down in sen/ice levels. Knowing the  changes in
rate levels for each  can level then allowed a calculation of an elasticity for each
subscription level:

    the percentage change in customers shifting down from that subscription level
           the percentage change  in the rate for that subscription level

Because the  Utility introduced an entirely new service level in 1989 - the  "mini-can",
judgment was used to determine the percentage of customers that would move from
the one can subscription level to that service level.  The Utility estimated that a total
of 34% of customers would select mini-can service after considering both the effects
of tonnage and rates incentives.

Comparing the results of the subscription levels that actually occurred in  1989 with
those forecast showed that the elasticities produced too many customers on the one
can, too  few  on the one can service level, and too few on the two-and-above service
levels.  This implies that the elasticities for all service levels were too low, and that
the Utility's assumption about the number of customers that would subscribe to the
mini-can  was somewhat optimistic.   Three factors affected the quality of the  elasticity
estimates:  1) the problem of poor  data, 2)  the introduction of an entirely new
service level,  and 3)  the fact that a  number of new waste reduction and recycling
programs were introduced along with the rate change.

More appropriate levels of elasticities for the 1989/1990 rate change, which included
the introduction of new programs, would have been double the levels listed above.
Further, the assumption that customers moved only one subscription level was found
to be inaccurate.  Approximately 45% of customers stayed at the same subscription
level; 42% reduced their subscription by one service level; 7% reduced two service
levels; and 3% reduced three service levels.  The number of service levels that
customers reduced was higher at higher starting subscription levels, with many at


 very high levels reducing to one or two cans. This may be partly because the new
 rates caused these customers to finally notice the level of their bills.2*
    29 More empirical information on customer choice and elasticities is  included in
Skumatz, "Empirical Analyses  of Solid Waste  Customer Subscriptions and Choice",
presented to Western Economics Association, 1990.


                 Part IV: OPERATIONAL CHANGES


Introduction	IV. 2
1.0 Cotoction and Customer Service Changes.	IV. 5
1.1  Enforcement Mechanisms	,	IV. 6
1.2 Number of Subscription Levels Available	IV. 12
1.3 Number of Service Options Available	IV. 13
1.4 Exemptions and Discounts	IV. 14
1.5 Simultaneous Implementation of other Programs	IV. 15
2.0 Bfflng System Changes	IV. 17
    Billing flexibility Needs	IV. 17
    Data Gathering Requirements	IV. 18
2.3 Utilizing Existing Billing Service	IV. 19
3.0 Planning Department Changes	IV. 20

4.0 Tmeine tor Changes.	IV. 23

5.0 Summary.		IV. 25

 Implementing volume-based refuse rates involves moving from simply providing a
 service to selling a service.  Part IV describes the significant changes that may be
 necessary to successfully implement different volume-based rate schemes in different

 When a solid waste agency changes the role it plays in its community  by adopting
 variable rates, it must also change the way it operates. The extra burden of
 providing service that has been paid for, and not providing service that has not
 been paid for, results in new responsibilities tor collectors and customer service
 representatives, the garbage billing system, and solid waste planners.

 Part IV  is divided into four sections:

      1.0   Collection and Customer  Service Changes
      2.0   Billing System Changes
      3.0   Planning Department Changes
      4.0   Timeline for Changes

 Section 1.0  is the longest of the three.  The changes discussed there are likely to be
 the most difficult and expensive changes involved with a changed rate system.
 Sections 2.0-4.0 concentrate on management and computer issues.

 The changes discussed here win cost the city money. Because every city's cost
 situation is different,  however, this chapter  emphasizes system changes and leaves
 cost analysis to the reader.

 Implementation costs can be compared  with the  financial impact of rate-induced
 recycling incentives fPart ft to evaluate the overall cost effectiveness of a change in
 system  design.
System changes fafl into one of two broad categories: changes required only during
the earty phuet of the new system, and ongoing changes resulting from the
change in the sold wast* agency's role.

The once-only changes can be regarded as investments in the new system,  and can
be compared with benefits discussed in Part I: Financial Impact to evaluate the cost
effectiveness of a system change.

                                     IV. 2

 The cost of ongoing changes will likewise reduce financial benefits calculated in
 Part I.
New Costs in Seattle
     Seattle has had a variable can rate for refuse service since 1981, but did not
     enforce subscription  levels until January 1989.  System changes in 1989

     o  delivery and use of company garbage cans
     o  move from backyard to curbside refuse collection
     o  changes in coUecttan routes
     o  new collector contracts
     o  expansion of the "trash tag" program for waste beyCTK! subscription levels
     o  curbside yardwaste collection
     o  continuing expansion of the curbside recycling program.
The information provided here refers to the implementation of several system
changes, and not just increased enforcement of the variable can rate billing  system.

Since January of 1988, the Seattle Solid Waste Utility has increased customer
service staff by hiring seven  permanent Customer Service Representatives, four
"sunset" (=six month position with benefits) C.S.R.'s, one sunset senior C.S.R., two
sunset inspectors, and five sunset account technicians and administrative support
assistants.  A variety of new equipment was required, including cellular phones for
inspectors' cars, computer equipment for managers and customer service
representatives, a re-worked customer service telephone system, a fax machine, and
office space and computer terminals for inspectors.

Although it is too early to state with confidence what portion of this expense will be
recurring and what portion will be an ongoing expense, phone call volume to the
utility is dropping.  CSRs handled an average of 6,363 calls per day, while 4.571
customers abandoned  their calls or received busy signals, in January of 1989.  The
high (or low) water mark was a one day total of 33,000 calls that caused a
breakdown in the City's phone system.  By December of 1989, 1,386 calls were
handled daily while 232 were not answered or received busy signals.

The drop in phone calls could be a sign that the educational portion of the
customer service and inspection task is nearing completion.

                                     IV. 3

The total cost of this expansion of staff, equipment and consulting is projected to be
$1.502,100 (out of a utility operating budget of about $43 million) for 1989, which is
officially regarded as a one-time-only start up cost.

The permanent increase in staffing levels has not yet been evaluated or explained to
the city council.

These quantities are unique to Seattle, and include implementation costs of all the
changes in Seattle's solid waste system.
                                      IV. 4


                              AND CUSTOMER SERVICE CHANGES
 A volume-based rate system can require several new activities of collectors and
 customer service/inspection staff.  In general, these changes revolve around the
 need to provide service that has been paid for and not to provide service that has
 not been  paid for.
            The following rate design  decisions  can  each  have a
            significant effect on the adjustments collectors and customer
            service staff wi have to make:
                     Enforcement Mecharvsm
                     Service Levels
                     Service Options and Fees
                  4. Low Income, EkJeriy and Handicapped Exemptions
                      and  Discounts
                  5L Svnuttaneous (mpierrMMitaiJOit of Other Progr

The implementation of each design decision listed above is discussed in detail in
this chapter.1  The discussion of each option is followed by an evaluation of that
option's likely impact on equipment costs, collector responsibilities, the need for
creating a distribution system for pre-paid bags or tags, and customer
service/inspector responsibilities.

Increased Customer Service and Inspection Costs

The design of a system will determine what form new costs take, but the bulk of
new costs are likely to be in the area of customer service and inspection.

In particular, system changes which require new  decisions or actions of  customers -
such as subscription systems or a bag system requiring trips to the store - can
result in a large number of calls to customer service representatives, lots of
complaints about the change in service, and disputes over responsibility for garbage
misses. C.S.R.S and inspectors will be responsible for  resolving disputes and
satisfying customers who complain.
    1 For a full discussion of rate issues, see Part II.

                                     IV. 5

 The added burden on customer service representatives is likely to require increased
 spending on telephone equipment computer equipment office space, and wages,
 both for overtime and for additional workers.  Added inspection costs can include
 more office space and computer facilities, more cars, telephones  in the cans, and

Enforcement mechanisms range from the honor system to full enforcement.  Full
enforcement systems can be expensive and difficult to implement but may become
necessary if customers routinely avoid paying for the service they use.

Wide-spread violations of service levels undermine  both the equity and incentive
goals of a volume-based rate system.  Effective enforcement can make a volume-
based rate real to customers and allow a carefully  planned system of economic
incentives to create the behavioral changes it was designed to create.
     The/ most common enforcement mechanisms are*

          o  The Honor System
          o Company (or cty) Cam
          o Pm-paid Bags or Tag*
The Honor System

Where the honor system is effective, no additional responsibilities will fail to
collectors.  Inspectors' responsibilities can be increased to provide some level of
enforcement If they art we* publicized, occasional random checks  can provide the
threat of enforcement which can affect the behavior of far more customers than
inspectors actually check.

In 1987, a Seattle study of 508 households determined that 24% of customers were
placing more garbage at the curb than they had paid for, while 22% were placing
jfiSS garbage at the  curb than they had paid for.2 These results could indicate that
the additional can charge of $5 that Seattle was charging at the time for was not
    ^Customer Service Level Survey," Jack Palmer, Seattle Solid Waste Utility, October
                                    IV. 6

 adequate to create an incentive effect.  The results also indicate that the honor
 system was not costing the Solid Waste Utility a significant amount of revenue.

 The honor system can be a good way to "phase in" volume-based rates.

       1.  New Equipment:  None

       2.  Increased Collector Responsibility:  None

       3.  Pre-pakJ Bag or Tag Distribution System:  None

       4.  increased Customer Service/ Inspector Responsibility:  Although customer
       service  representatives will  not have to resolve disputes involving disposal in
       excess  of service levels, they will have to explain system changes and help
       customers move to appropriate service levels.

 Company Cans

 Under this system,  collectors must collect garbage only from officially sanctioned
 containers, different sizes of which correspond to different subscription levels.  Ideal
 containers would be unique (different from any cans available from local retailers),
 would be designed for heavy industrial use (not light and easily blown by the wind),
 and would be compatible  with an automated collection system, if a city has one.

 Confusion and complaints can be reduced by determining customers' service levels
 and delivering cans well in advance of the starting date of the new enforcement

 A company can enforcement system is inflexible, in that customers must determine
 their average level of refuse disposal and then dispose of that amount of waste (or
 less) every week.  A yardwaste collection system can help customers stay within
 their subscribed service levels in spite  of seasonal surges in yardwaste levels.  A
 system of payment for "extras'1 allows customers to occasionally dispose of refuse
 beyond their subscribed service levels.  Charging for extras can  be accomplished

       o Stickers or tags, which must  be pre-purchased  and then stuck on extra
            bags or bundles of refuse
       o Pre-purchased official garbage bags
       o Recording extra  units in route books

 Providing an incentive  directly to collection staff (such as a small portion of the

                                     IV. 7

purchase price of trash tags) can help counteract the temptation to collect unpaid
garbage either in exchange for gratuities or simply to avoid the conflict associated
with leaving garbage uncollected.

In Seattle, trash tags are sold at 7-11  stores or through the mail for $5 each.  Of the
$5 purchase price, $1 goes to the retailer and $1 goes to the  contractor providing
collection in the area where the trash tag was sold.

Collection and customer service/inspection costs of company can systems can

      1.  New Equipment Costs: Costs associated with  selection, purchase and
      distribution of company cans.  Ongoing costs indude the cost of holding an
      inventory of cans, exchanging cans for customers  who change their service
      levels, and costs associated with  managing the inventory and keeping data on
      inventory changes.

      In Seattle, the  cost that contractors incurred purchasing and distributing cans
      to customers was offset by savings that resulted from a shift from backyard to
      curbside refuse collection.

      2.  Increased Coiectof Responstbdfty:  Under a bag or tag system, collectors
      must leave behind refuse that is not in a company can and has not been
      paid for. Collectors must keep lists of refuse that  is not paid for or not put
      out ("not out lists') so that CSRs  can quickly resolve disputes involving missed
      collection. .

      Under a routebook extras system, collectors must  record all extra refuse for

      Seattle's contractors did not have to  increase their collectors' pay scales when
      recording rssponstbifities were increased.  Consultations with local unions can
      help determine what effect a company can system will have on labor costs.

      3.  Ant-paid Bag or Tag Distribution System: Arrangements must be made
      with local stores to sett these "tickets* for extra collection. Alternatively, bags
      or tags  can be sold at City Hall, at community centers,  or through telephone
      or mail order.
      4.  Incraasad Customer Serves/ Inspector Rasponsfcfity:  Inspectors and
      customer sarvica representatives will be responsible for resolving disputes by
      comparing customer complaints to "not-cut lists* and lists of improperly
      prepared garbage.

                                    IV. 8

       Such disputes will occur often during trie implementation process as collectors
       and customers learn the new enforcement  system.  Even after the new
       system is familiar, customer service staff will continue to resolve a smaller
       number of disputes.
Pre-Paid Bags or Tags

Under a pre-paid bag system, collectors must collect refuse only from sanctioned
bags pre-purchased from the city or waste hauler.  Because bags are collected
along with the garbage, disputes associated with re-filling of company cans are

Similarly, tag or sticker systems  allow customers to pay for units of refuse service in
advance.  Collectors collect only bags, cans or bundles of garbage which have
proof of payment attached to them.

Because use of bags and tags is flexible, no separate system for collection of extras
is necessary.  Collection of bags is more efficient, because collectors need not
return to the curb, as they must to replace emptied cans.3

A pre-paid bag or tag system can significantly reduce or even eliminate costs
associated with operation of a billing system.  If "customer charges" are financed out
of tax revenue, then direct payment for bags is the only form of billing that is
necessary.  If customer charges are financed from flat rates, a billing  system
capable of performing flat rate billing tasks will be adequate. Otherwise, per-unit
costs can be set  to cover all system costs.  For more information on billing systems,
see section 2.0 of this part

Also, a  simple payment scheme such as a pre-paid bag system can  cut down on
customer service  workload (and costs) by cutting down on billing related disputes.

A major operational problem with pre-paid bag systems is the vulnerability of bags
to animals, mainly dogs and raccoons.  Customers are sure to be upset by litter
that could result from animal attacks on bags, and disputes could arise over
    'Marvin G. Katz, "Collection Strategies of the Nineties," in Waste Age. Feb. 1989.
p.64-65:  When the City of Dallas switched  to  a  plastic bag  collection  system,  city
officials "expected a 10%  increase in the 725 daily  stops per collection crew, tney
actually rose nearly 14%,  to 825 stops  per crew.  As a result Dallas parked  14
collection trucks and eliminated 28 sanitation positions."

                                     IV. 9

 responsibility for cleaning up animal-created messes.  The animal threat can be
 mitigated by asking customers to place pre-paid bags inside their own garbage
 cans, through use of bags containing a dog-repellant scent, or by encouraging
 customers to add a teaspoon of ammonia to each bag of garbage.4

 Seattle health code does not permit disposing  of food wastes in plastic garbage
 bags.  Such a health code provision could require that bags be placed inside
 garbage cans.

      1.  Equipment costs: None.

      2.  Increased collector responstoity: Collectors must not collect refuse unless
      it is in a pre-paid bag and does not weigh more than the community's par-
      bag weight limit  Other new responsibilities could indude reporting fitter
      problems and hand-lifting  refuse that used to be dumped by an automatic
      collection system.

      Elimination of the need to return containers to the curb could result in a net
      decrease in collector responsibility  under a pre-paid bag system.

      3.  Pre-paid bag or tag Distribution system: Bags must be designed,  ordered,
      and distributed through the mail and/or through local stores.

      Seattle, which sells stickers called Trash Tags' to customers wishing to set
      out extra refuse, sells the  stickers,  priced at $5 to the public, to 7-11  stores
      for $4.  7-11 carries  the stickers for the $1  profit and for the  benefit of
      attracting customers to their stores. Alternatively, customers  can mail order
      Trash Tags directiy from the Seattle Solid Waste Utility.

      Alternatively, bags or tags could be sold at City Had or at community centers.

      4.  hxrenaod customer sefvicefrepector reeponsfcety: The customer
      service/inspection system  wiH have to take responsibility for sale and
      distribution of bags (either to retailers or directly to customers), insuring
      coiection of properly prepared and placed bags, and resolving disputes
      surrounding collection misses  and  littering caused by  animals.
    'Robert Move, of the Lansing, Michigan, City Refuse Department, reports, *tf people
have a continuing problem with animals, we suggest they put some ammonia into the
bag and seal it up. When the animals get in they get a pretty good whiff.
    "We also keep dose track of loose dogs in town/


Route Books

Under a route book recording and enforcement system, collectors must have a
record of the service levels of each residence on their routes.  Extra garbage placed
at the curb is recorded in the route book, and the next  period's bill reflects the cost
of collecting the extra item. Customers can be provided with official cans or they
can be allowed to use their own cans if they fit within approved dimensions.

A route book system is very convenient for customers, who do not have to obtain
evidence of prepayment (bag or sticker) to have  extra refuse hauled away.
Customers also have the flexibility to dispose of whatever amount of refuse they
need to each month, rather than being committed to a set average disposal level.

On the other hand, a route book system can add to revenue volatility for a solid
waste agency, which would have to depend on collection staff to properly record
extra garbage.

      1.  New Equipment  A route book system will require a  billing system that is
      capable of processing a large amount of customer information.  For more
      information on billing systems, see section 2.0.

      2.  Increased Cotoctor Responsibility:  Collectors must read service levels
      from their route books and  must record ail refuse collection  in excess of the
      subscribed service level.  Penalties or bonuses should be created to provide
      an incentive for collectors to record all extra bags or cans collected, as failure
      to enforce service levels defeats the purpose of a volume-based rate system.

      The increased responsibility of collection staff to read route books and record
      all  refuse collected in excess of subscription levels could result in a higher
      pay scale for collection staff.

      a  Pre-paid Bag or Tag Distribution System: None

      4.  Jncrmeod Customer Service/ Inspector Responsibity. Because service will
      be provided to a customer  under a route book system even when the amount
      of waste disposed exceeds the customer's subscribed service level, disputes
      about missed collection or number of cans or bags set out will not take place
      until  a  bill reaches the customer.  Delayed disputes can  be  more complicated
      and more difficult to resolve than disputes which take place soon after the
      disputed event

      Customer service and inspection staff will  have to improve monitoring and


      record keeping to the point that they will be able to effectively resolve
      disputes one month or more after the disputed event takes place.

      The customer service/inspection system will also be responsible for complaints
      about missed collection.
                                 )N LEVELS A/olu
                         (i.e. mini-can, 1  can. 2 can etc.)

A larger number of service level options will result in a wider distribution of waste
reduction and recycling incentives across the spectrum of waste generation levels.
Customers benefit from more service level options because they pay more
accurately for the service they actually use. Customers can move to a  lower service
(and billing) level through a smaller change in disposal volume than would be
necessary under a system with fewer service level options.

Since pre-paid bags or tags can be used at any time, questions of subscription
levels do not apply to those systems.  A route book system can be operated as a
subscription system, or it can be operated as a "metered" system, where customers
pay exactly for the level of service that they use, as is the practice in other public

      1.  New Equipment:  Under an official can system, a large number  of service
      levels will complicate the process of procurement and delivery of official cans,
      and will increase the cost of holding an adequate inventory of cans.

      Can  distribution can be simplified by providing customers with a  number of 30
      gallon cans that corresponds to their service level. The drawback of
      providing multiple cans is that it complicates the inspection process and
      creates an incentive for customers to steal cans.

      2.  Increased Costcftor nstpomatolty. If cans are unique and well-designed.
      actual collection should not be more difficult where a large number of service
      levels is offered.

      Under a rout* book system, a larger number of service subscription levels
      would make the process of checking waste at the curb against subscription
      levels in a rout* book more difficult and time consuming. A high degree of
      difficulty could require higher  pay for collectors and more trucks  and crews,
      since complexity would increase  per-nousehoW collection time.

      a.  Pre-paid Bag or Tag Distribution System:  Only for  extras


       4.  Increased Customer Service/ Inspector Responsibility:  As the complexity
       of a solid waste system increases, the burden on customer service and
       inspection staff will increase.  More confusion - and more disputes - will result
       from a larger number of service levels, and resolution of each dispute is likely
       to become more difficult and time consuming as disputes become more

       A large number of service levels will also result in customers "fine tuning" their
       service levels.   Such frequent switching will increase the number of switches
       that CSRs must handle, and will result in more billing for subscription level
                            (i.e. Backyard and Curb)

Allowing customers to choose to receive extra service options for a fee allows
customers the option of receiving more convenient service without requiring all
customers to pay for that service.

Where customers have options as to the type of service they receive, rather than
simply the amount of waste they choose to dispose of, collectors and  customer
service/inspection staff must make sure that customers receive the service they pay
for, but do not receive service they do not pay for.

The most common service option is backyard (versus curb/alley) collection of refuse.
Collecting some  customers' waste from the backyard will increase the  duties of
collectors and customer service/inspection staff, but a backyard  option can mitigate
dissatisfaction with a switch to curbside collection and can also  be a valuable source
of revenue.

Yardwaste and recycling programs can be regarded as service  options and can
have fees associated with them.  Costs of implementing recycling and yardwaste are
discussed in Part I: Feasibility. The existence of yardwaste or recycling systems
should not increase collector responsibilities unless separation is mandatory, in
which case additional enforcement  responsibilities may fall to collectors.

      1. Equipment Costs:  None

      2. Increased Collector Responstoity: Where collectors must collect most
      refuse at curbside and some refuse in the backyard, they must keep and
      read a current list of customers receiving backyard  collection service. Also,


      trips to people's backyards take time and therefore decrease the number of
      residences that a crew can collect from during a day.

      Where all customers previously received backyard collection, a switch to
      curb/alley or optional backyard service can significantly reduce collectors'

      a Pre-pakj Bag or Tag Distribution System: None

      4. Increased Customer Service/ Inspector Responsibility.  As is the case with
      service levels, service options provide additional opportunities for disputes and
      complaints, and are liable to increase the complexity of complaints that the
      customer service/inspection staff must process.

      Such increased responsibilities can be offset by reduced collector duties
      resulting from more service options.
                      1.4 EXEMPTIONS AND DISCOUNTS
                 for low ficoms, eJderfy and hanrijcappod people

Variable rates will hit low and fixed income people the hardest  Fairness and politics
both require reducing the economic burden on these groups.  Also, rates which
seem very high to any group can create an incentive to dump illegally.

Handicapped and elderly people may need (rather than simply want) service
options, especially backyard refuse collection. Exemptions from option fees can
make such service available to people whose health (not their yard) prevents them
from taking their own garbage  to the curb.

      1.  Equipment Costs: None
      2. termed Coiector nssponBibHy.  A discount and assistance program will
      probably increase service levels and increase the number of customers
      receiving backyard service.

      Coiectors wi need to learn which houses receive backyard collection. A
      community may wish to sett low income ore-paid bags, designed differently
      than other bags, to prevent black market dealing in discounted bags.
      Collectors would have to learn which nouses are allowed to use those bags.

      3, Pre-paid Bag or Tag Distribution System:  Nona, unless the community
      chooses to use different colored bags for people receiving discounted service.


      4. Increased Customer Service/ Inspector Responsibility:  Requests for
      discounts and exemptions will probably be handled at least in part by the
      customer service/inspection  staff, although a portion of this task may be
      handled by a welfare agency within the city government.  The process of
      qualifying people as "physically unable" to carry refuse to  the curb will
      probably require an on-srte visit by an inspector to evaluate the customer's
      physical capability and the difficulty of the terrain between the customer's
      house and curb.

      In Seattle, backyard exemptions (backyard collection  service at no extra cost)
      were initially granted without verification by an inspector, then  checked as
      inspector time permitted.  This  procedure insured exempt status for people
      who needed it until the inspection  system had time to check on the legitimacy
      of backyard exemptions. Although backyard service  is not available from the
      Solid Waste Utility for yardwaste, the Seattle Youth Conservation Corps
      delivers yardwaste to the curb  on  a volunteer basis for people requiring help.

      Other utilities will often have lists of people who have qualified for assistance
      with utility rates.  Use of such existing lists can help reduce the burden of rate
      assistance qualification.

Often, communities will choose to implement several solid waste service changes at
the same time.  For example, Seattle began enforcement of its variable can rate,
added several service levels and service options, switched from backyard to
curbside service, and mandated separation of yardwaste all at the beginning of

Implementing several changes simultaneously can increase customer confusion,  but
can reduce long-term customer aggravation by eliminating the need for customers to
repeatedly learn new solid waste responsibilities.  Customers may not be willing to
endure more than one  period of solid waste transition.

Simultaneous implementation of programs which go hand in hand, such as volume-
based rates and waste diversion programs, can keep solid waste programs
"integrated" even during the implementation phase.

      1. Equipment Costs:  None

      2. Increased Cofector Reeponsibity:  Collector responsibilities are not likely


to increase if two or more programs are implemented simultaneously,
although customers could ask the collectors for system information .that the
collectors do not have.

Where recycling or yardwaste separation is mandatory, collectors will probably
have to take on enforcement responsibilities.

Training collection staff on their  own responsibilities, is, of course, necessary.
Training them to explain changes in ail solid waste programs to customers
can help decrease customer confusion and reduce the burden on customer
service representatives.

3. Pre-paid Bag or Tag Distribution System:  None

4. Increased Customer Service/ Inspector Responsfcity: Simultaneous
implementation  of more than one solid waste program can cause a lot of
confusion.  It will take time for customers to learn collection days, separation
rules, placement rules, and subscription and service level options. During that
education process, many customers will not get their garbage collected
because of misunderstandings of the new system. Garbage misses, whether
the fault of the  collectors or the customer, are  likely to result in complaints
and disputes, and, in  turn, and  increased work load for customer service
representatives  and inspectors.

CSRs can help  create a positive relationship between customers and the solid
waste agency by making every  effort to resolve disputes in  favor of the
customer in the early  going.

Cities which have traditionally financed solid waste service through general fund
revenues or flat rate billing may have to  significantly change the design and
operation of their billing system.  Routebook and can subscription systems require a
billing system that is capable of charging different customers different amounts on
the basis of service levels and decisions on service options.

Simple bag or tag systems do not require a complicated biding system.
Communities wishing to combine a pre-paid bag/tag system  with paid service
options-such as backyard collection, yardwaste service and  bulky item collection-
could arrange  payment for such special  services either through a billing system or
through color-coded bags representing various service levels and options.

In general,  however, the information in this chapter will be more useful to
communities using subscription or routebook systems than to communities using
pre-paid bag or tag systems.
     The issues addressed over the remainder of this chapter include:
      2. Data gathering requirements.
      3. AvafebOty of bOng service.
                        2.1 iflU fNfi H FXIBIUTY

In addition to being able to adapt to changes in rate levels, a billing system should
be able to charge or not charge for any item on the list below that will be part of
your community's rate structure:

    1. Various service levels:  mini-can, 1-can, 2-can etc.
    2. Backyard refuse collection
    3. Yardwaste collection (where a fee is charged)
    4. Curbskje recycling collection (where a fee is charged)
    5. Charge for service level change
    6. Fee for bulky item pickup
    7. Credit for missed collection
    8. Oumpster Charges: lock, compaction/stopping charges
    9. Charge for extras  (Can be  charged through cost of bag or sticker or  on  the
      basis of routebook notations)
    10. Vacancy rates
    11. Rates for people living in multi-family buildings


 More complex billing requirements can lead to higher billing system charges.

 Billing systems require different amounts of lead time for major operating changes.
 In Seattle, a lead time of ten months is required for any major change in the way the
 billing system operates.
                       DATA GATHERING REQUIREMENTS
Information from the billing system will need to be available to both customer service
representatives and solid waste planners and rates analysts.
Customer service representatives will need to see the account information for
customers who call for help.  A large portion  of customer problems result from the
customer  misunderstanding subscription levels or other aspects of the solid waste
system. Quick access to account  information witt allow customer service
representatives to process a large  number of customer problems quickly.  Where
possible, information on a customer's route and day of collection should be included
with account information.

Providing  computer access to customer account information can improve customer
service and save employee time.  Requiring customer service representatives to look
up account information by hand will cause service delays and will increase the paper
work burden on (and cost of) the customer service system.  Ideally, customer
service representatives should also be able to arrange refunds (for service misses)
and service level changes on their computer terminals.

Planners and analysts win also require information from the billing system in order to
set  rates which witt cover costs and witt  also provide the desired incentives.
            Intoiiiuttcxt $Mt s fatev analyst OF planner would ike from a
                           lave* ever time,
          - afgiiiction oT options over time.
            4:  tJ^ of -Bxarae* {beyond subscription levels) over
            &  Number c* houMhok* at each b«ng address (where
                            and possible)

 Often utilities share the fixed costs of billing service by sending a combined utility
 bill.  An existing municipal billing service should be able to provide cost estimates
 based on the number of bills to be sent and the number of variables (billing options)
 required for the garbage billing program.

 Private billing service  may also be available, and is probably worth considering as an
 option.  Private billing service is likely to be more flexible,  but shared use of a
 government operated billing system may be preferable for two  reasons:

    1. The threat of turning off water or electric service is an exc,. lent enforcement
      tool.  [The water threat has been an extremely effective deterrent to non-
      payment in Seattle: the Solid Waste Utility had to absorb only $415.30 in bad
      debt out of approximately $24 million in bills in 1989.]  Alternatively, the solid
      waste agency could lobby for the power to place liens on property, a method
      that tends to be slow and heavy handed, but ultimately effective.

      A private billing service may not be able to  collect delinquent  payments  as
      quickly  as an agency with access to convenient enforcement options.

   2. Shared use of  postage and computer equipment may bring savings not only
      to refuse customers, but also to (for example)  water and sewer customers,
      who are often the same people.5
    5Brown and CakJwell Consulting Engineers, "Residential Billing and Customer
Support Services Study," for Seattle Solid Waste Utility.  October 9, 1987, P. 1-15.


                     3.Q PLANNING DEPARTMENT CHANGES

 Although most electric and water utilities have years of experience with rate setting,
 most solid waste agencies have traditionally charged a flat rate or paid for their
 services out of general fund revenue. While flat rate billing may be a matter of
 dividing expected revenue requirements by the number of customers, variable rate
 billing is a  complex process that may require a waste agency to hire a new staff
 member, to contract wtth a consultant for some rate setting work, or to borrow rate
 selling staff from another city agency.
Necessary skills

The rate setting process has two parts: 1) creating the rate setting model and 2)
maintaining and updating the model ("tracking").  The two pans of rate setting
require different levels of skill and experience (and therefore cost).

CreatiriQ the Model
     Successful variable races must strike a balance; between two functions wttch
     can argue tor very different rates;

     o   Provide incentives iter reduced disposal and increased recycing.
     o   Cover the waste agency's costs
A good model will allow a community to set rates at an effective level, to examine
the effect on rates of changes in collection costs, disposal costs, and
recycJing/yardwasta programs, and to examine the risks and benefits of various
planning alternatives.

      Skills required of sorfisone creating a solid waste rates model include:

      1. Foiecaslfcig.  WeO-constructed forecasts of future disposal and
      subscription, based on past data, price elasticities from other places,
      and  economic activity projections, are valuable in the rate setting
      Z Accounting.  A rates person must understand cost allocation and
      be abis to perform cost allocation calculations, as well as adjustments
      to service needs and costs, on the basis of forecasts.  Frequent
      financial reviews wi be necessary soon after implementation of a new
      rats system.


       3.  Rate design.  The rates person must understand price incentives,
       and particularly concepts related to utility pricing.
       4.  Tax and contract experience.  The rates person must be able to
       understand the implications of taxes and contract provisions that affect
       the solid waste agency.
       5.  Computer ability.  Some effective  rates models have been written on
       Lotus; but use of a higher level language can allow a model to adapt
       more easily to a wide variety of situations.

Maintaining the Model

Maintaining a rates model does not  require  the level of expertise that creating it
does, but a person in charge of "tracking" must understand the model's operation
and its limitations.

       Skills required of a person responsible for tracking a model indude:

       1.  Understanding of the model's inputs.  Inputs indude allocated
       costs, subscription levels, tonnages, and other factors affecting
       2.  Understandrtg of the model's output The tracking person must be
       able to interpret the results of the model's run.
       a  Computer Bteracy.  The tracking person must be able to use the
       model and adapt it to various situations  which will arise.
Hiring and Contracting

Having the creator of a rates model on staff will eliminate the need to familiarize the
rate person with the intricacies of solid waste  operations. Other benefits of an in-
house rates person indude more convenient modification of the model whenever it
becomes  necessary and decreased probability of misinterpretation of the model's
output  On the other hand,  hiring a very qualified person can be expensive,  and a
jurisdiction may be  able to save  a significant amount of money by employing
different people for  creating  the model and maintaining the model.

For creating a rates model, a rates analyst should have  all the abilities listed  under
"Creating the modef and ideally  should have  direct experience in utility rate setting.
This analyst should  have a masters degree in economics or a related field: A
bachelor's degree may be acceptable if the rates person has a great deal of
experience.  An employee capable of handling such complex tasks and willing to
accept a large amount of  responsibility would likely command $30,000-40,000 or
more per  year plus  benefits, depending on wage levels  in your local economy.


 The rates tracking person should have a good grasp of accounting principles, a
 strong enough computer background to understand and operate the model, and
 should have good knowledge of solid waste operations in your jurisdiction.

 Consulting service in the area of rate setting is widely available.  In general,
 consultants with experience in utility pricing should be able to adapt their abilities to
 refuse service pricing.  Also, consultants may have the benefit of experience working
 with other jurisdictions  on similar projects.

 Seattle paid a consultant $60,000 to develop an in-depth rates model using the
 GAUSS computer language.  Other communities' consulting costs are likely to be
 significantly lower, particularly where less data allows the use  of a Lotus model.

 Under some circumstances, communities that are very eager to  reduce costs can
 create a rates model using existing staff and Lotus or a similar spreadsheet
 program. The drawback of such an approach is that the rates model it yields is
 likely to be fairty inflexible and limited in its ability to examine impacts of various
 operating changes on  rates.  Commercially produced rate modelling software
 provides another opportunity for in-house  rate modelling.

 On the other hand, the information upon which rate studies are  based tends to be
 shaky. In particular, the waste disposal elasticity of price* is very difficult to calculate
 in communities which have never before charged volume-based refuse  rates.
 Complicated rates models may  provide more flexibility in examining existing data, but
 no solid  waste rate study * better than the forecasts it is based on.

 Computer Equipment

 The creator of the model wtfl probably have thoughts on what computer equipment
 will be necessary for the model  Needs witt probably fail in the range of an IBM  286
 (or the equivalent), a printer, and maybe a plotter.
    *The percentage change in waste disposal that results from a one percent cnange
in pries.


                    4.Q  TIMELINE FOR SYSTEM CHANGES

The timeline on page 24 represents the schedule that Seattle would like to have
followed for implementation of its new rates, recycling and refuse collection
programs.  In reality. Seattle's implementation occurred much faster, and an
unnecessarily high level of customer confusion was the result.7

Seattle's population is 490,000.  Larger jurisdictions may experience a longer
implementation timeline, while smaller jurisdictions may be able to change their rate
systems more quickly.  In addition, the timeline presented for Seattle is based on
implementing rates and system changes under a variable can system.  This
implementation schedule may not be applicable for a jurisdiction implementing the
simpler bag/tag system.

Perkasie, Pennsylvania,  a town  of 6,500, introduced a prepaid bag system in
January 1988.  The elapsed time from initial planning to implementation  was about 9
months.  The major steps involved are listed below.

  o   February 1987 - initial meeting  with potential consultant manager, and public
      works staff to discuss possibilities of implementing bag system

  o   April • June 1987 - consultant prepared recycling and solid waste
      management plan

  o   Summer 1987 - discussions of bag fee approach in public works committee

  o   August 1987 - work session  on bag fee with  public works and local

  o   August/September 1987  - evaluated and finalized price of bags

  o   October 1987 - final ordinance passed

  o   early December 1987 - Public meetings (about 250 citizens attended)

  o   January 2,  1988 - Bag system  implemented

  o   Quarterly and annual reports thereafter.
    7 For instance, Seattle hired its rates staff just 13 months before implementation of
its modified rates.

                                   IV. 23

(Times relative to date of ayaten change)
• Begin Informing
political leaders and
conmunlty groups
about potential

• Male -threshold-
•Bag/fag Vs. Can
•Billing details
recycling programs

• Bring In accountants
and other experts to
study feasibility

• Develop a
•Analyie changes In
col lection and
customer service
•Analyte now staff
•Prepare for new
data processing
•Plan publicity

• Bring on Key Staff:
•Rates Analyst
•P.R. Person
•Contract management
•Customer service
• Develop
•Critical Path';
that It. Inform
project managers
of ethers who
are dependent on
their wort.

• Specific
sample rate
yardwaste and

• Propose
ardlnace changes

• Operate Pilot
•Select and
carefully to
•Be prepared
to make

• Start phasing In
CSR staff.
approach -
hire longer
term, higher
positions first

* P.B. efforts
should be In
full swing

• Billing system
tested and working

• BagVTag
distribution system
In place

• All CSRs hired

• Height of P.R.


• Collect
first, resolve
• Take care of
customers -
will spill
Into the

• Expect large
overt (me.
temporary and
employee costs

• Internal and
studies and
•CSR workload

• Start to phase
out temporary
and Intermittent
workers and
overtime hours

* employment
should return to
long term levels

                                 5.0 SUMMARY

Part IV discussed operating adjustments that a solid waste agency may have to make
to successfully implement a volume-based rate system.

A volume-based rate system requires new activities of utility planners, and some rate
design and enforcement options will require new activities of collectors, customer
service and enforcement staff, and the solid waste billing system.

This part described new activities that may be required  under various system designs.
This information can be useful in the  decision making process,  and can also help
solid waste agencies to avoid unexpected cost increases once  implementation of a
new system has begun.
                                     IV. 25

                           PART V: CASE STUDIES

1.0 Seattle's Experience: Variable Can Rates	V. 2
1.1  History of Seattle's Rates and Programs: 1981 - 1988	V. 2
1.2 Seattle's Rate Design in 1988	V. 19
1.3 Rate and Program Changes in 1989	V. 23
1.4 Impacts of 1989 Changes	V. 42
1.5 Future Rate-Related Recommendations	V. 44
ZO Bag/Tag Systems	V. 46
2.1  Table 2.1:  Unit Pricing Programs	V. 46
    Table 2.2:  Complementary Waste Management Programs	V. 48
3.0 Overviews of Other Jurisdictions	V. 51

 This section summarizes the history of Seattle's solid waste rates, and addresses issues
 that may be of interest to other jurisdictions that may be re-examining the structure of
 their solid waste rates.  The paper includes discussions of a variety of topics, including:

  o   the Utility's financial status and customer base;
  o   the structure of the rates and the change from flat fees to volume-based rates;
  o   the effects  of the rate increases and volume-based rates on service levels and
  o   considerations of illegal  dumping and enforcement;
  o   a summary of cost allocation and rate design in 1988;
  o   summary and conclusions from two in-house analyses;
  o   a discussion of the recommended and implemented  rate changes in 1989; and
  o   a discussion of future changes planned for Seattle's solid waste rates system.


Seattle has had mandatory garbage charges since 1961, when the Solid Waste Utility
was established.  The utility  operates as an enterprise fund under the Department of
Engineering,  in addition, the Utility operates as an independent Utility, and as such,
must be self-supporting, with no subsidies from general funds and tax revenues.  This
operating structure is unusual, and Seattle is one of only three solid waste utilities in
the State of Washington.

The Seattle Solid Waste Utility provides solid waste services for residential dwellings in
the City of Seattle.1   Collection  is provided through  contracts  with private  haulers.
Billing for residential households is done by the Solid Waste Utility through the  services
of the Combined Utility Billing System (UBS), operated by the City's Water Department.
The UBS system combines billing for the  City's sewer, water, and garbage  services.

The Solid Wast* Utility receives  the bulk of its monies through the rates  it  charges
residential customers. The residential bills consist of biding for collection of cans and
    1 This  case study is based on "Volume-Based Rates in  Solid Waste:  Seattle's
Experience", by Lisa A. Skumatz, February 1989.

                                    V. 2

 dumpsters, and these customers account for 75% of the Utility's revenues. -Revenues
 collected (through transfer station rates) for services at the City's two transfer stations
 currently account for another 10-11% of revenues.  This includes dumping of refuse by
 drive-in autos and trucks.

 The two major non-rate revenue sources are interest on financial holdings (accounting
 for 3% of revenues), and the commercial surtax (contributing 8-9% of the Utility's annual
 revenue).  Until 1986, the Utility collected revenues from customers dumping waste at
 the City-owned landfills.  The City no longer collects any landfill revenues, and is closing
 the two it owns.

 The commercial surtax is a tax on private haulers operating in the City of Seattle.  This
 tax is a premium  on the City's Business and Occupation tax.  The commercial surtax
 was implemented in June of  1986 to  help  apportion  the burden of the City's  landfill
 closure expenses to more  of the contributors.  Funds related to the contribution of
 waste by residential customers are assessed via the City's residential rates. However,
 commercial customers also contributed to the City's landfills.  Because the City does
 not serve commercial customers, the surtax was established as a method of garnering
 contributions toward landfill closure from this class.

 Other sources of  funding available to the Utility include grants, settlements, and other
 miscellaneous revenues.  However, these are  not  regular sources, and  make up  very
 small portions of the total revenue.

 History  and Structure of the Existing Rates

 As mentioned, Seattle has  had mandatory garbage charges  since 1961.  The Utility
 moved  away from a fixed  charge system  and  established its variable can (volume-
 related) rate  structure  in  1981.   The structure has  proven  to be an incentive for
 recycling and waste reduction, with over 26% of the City's waste recycled  in 1987.
Table 1 gives historical rates for  Seattle's solid waste customers since 1961.

 Prior to the introduction of  volume-based charges, single family customers paid fixed
charges for unlimited waste removal, with fees increasing from $125 in 1961  to $2.00
in  1965. In  1969, a small variable component was introduced. An additional  charge
of  50 cents beyond the new  base rate of $2.70 was included for waste beyond four
bags and four bundles.  That "extras" charge was kept constant until variable can rates
were introduced in 1981.  The "base" portion of the rate increased to $4.00 in 1974, and
was $6.85 by 1981.
                                     V. 3

                                              Tab* 1. Hbtioifcal Sold Wttte Rtfts: 1961-1968
pratS no
«•*• unto


SO 4*








                                                                                            MULT1 FAMR.Y VARIABLE CAN RATES
                                                                                 SUBSCRIP         OROf     OROf   OROf   OROf  ORDf   OROf
                                                                                 t£V6>-	109130     11044*   1110*1   mm  | <2942   113374
                                                                                         7/1*2   0/1*4   1/1*5   */]**   •/!/•/
                                                                                     o     o $iios  *»$14.15    $To6$Too$7so—$Tso
                                                                                           1 MtcpiMl    M$17.1S      $540    $545   M ?"    $855
                                                                                  (1*1)     2 $340411*    <»Md $20.15   $0.00    $7.15  $1000   $1455
                                                                                    iv«     3 tor one*     tofono*           -          $1330   11055
                                                                                  (2*2)     4 w*«*yovc    wotfclyovc    $O.M   $1015  $14*0   $2455
                                                                                    IV«     5 Itvo*       **•«.                       |,9W   i,, M
                                                                                  (3*3)     * $340Afl«    $SOOAN«    $12.00   $13.15  $2320   $3455
                                                                                    rv«     7 toiMc*     to.Mo*                     ,2,50   ^,55
                                                                                  (4*4)     0 OMMrovC.

                                                                         FIRST CAN
                                                                                                 $15.00  $10.15   $2>*0  $4455
                                                                                       0.5    $3.00    $300   $330   $500

                                                                                             $345    $355   $440   $640
                                                                                      	$000    $000   $000   $005
         DATE   tVCLEm
              MM   MM
              MTt   MM
              M40   MM
              MM   MM
              MA   MM
             •MM   MM
                                                                        MOTES ON
O*n IOM. 40 *

$11 10
111 49

•I »




Duplex  customers paid building charges that averaged about 75% higher than the
"base" charge for single family structures, and paid the same 50 cents extra, but for
extras beyond six bags/bundles. Rates for multi-family buildings larger than duplexes
were  assessed on the basis of number of apartments in  the building, and the per-
apartment charges were approximately 50-70% of the single family rates.

Charges at the transfer stations and landfills  tended to be  volume-based (specifically,
a per-ton rate) from the beginning except for the "minimum charge" introduced for small
commercial loads at the transfer stations.  In addition, automobiles were allowed free
"dumping" from 1961 until 1986 for city residents.  A charge for non-City automobiles
was introduced in 1970, and for City automobiles  in 1986.

Introduction of Variable-Can Rates

Ordinance Number 109130, effective January  1, 1981, instituted volume-based rates for
single and  (to some extent) multi-family buildings.  The system was initially set up to
offer subscriptions at an assortment of  levels:  zero can2, one can with no bundles; two
cans and two bundles; three cans and three bundles; and four cans and four bundles,
and so on in one can plus one bundle  increments.  Customers selected a subscription
levels and were billed4 on the basis of that number of cans of service per week.  For
single-family buildings,  the zero can service level was offered for $1.00. One can per
week  cost $6.40 per month, with an addition of $1.50 for each succeeding service level.
         zero can service level was established for customers who could demonstrate
that they disposed of no waste.  The qualifications for the zero can  were stringent,
because the rate was traditionally heavily subsidized. The City sends inspectors to visit
customers wishing to qualify for the zero can.  The inspectors must be convinced that
the customer can meet the criteria for the zero can service level as expressed in the

      "... a customer  must  not  generate any  solid waste for collection  or
      disposal.  With occupied premises, the customer must demonstrate  a
      consistent and effective practice of selective purchasing to minimize refuse,
      or recycling material  whenever practical,  and of composting any  yard
      wastes generated on the premises.  A customer may not become eligible
      for the zero can rate by hauling his or her garbage to a transfer station,
      disposal site, or by disposal in another customer's containers."

    3Seattle's  billing is generally bi-monthly, on a ore-billed basis.

                                     V.  5

                 Table 2.  Monthly Single Family Rates, 1981-1985
                               Variable Can Service

                                     1981         1982        1935
  Zero can service:                   $1.00       $1.00      $1.00
  One Can per week:                 $6.40       $ 6.65      $ 7.45
  One Can+One Bundle:               n.a.        $ 8.15      $ 8.95
  Two Cans+Two Bundles:            $7.90       $11.15      $11.95
  Three Cans+Three Bundles:        $9.40        $14.15      $14.95
  Additional Can+Bundle:             Add $1.50   Add $3.00   Add $3.00

 In Jury of 1982,  a new service level of one can and one bundle was introduced, and
 the (single family) rates were established at  $6.65 for the first  can,  $1.50  for the
 additional bundle, and increases  of $3.00 for the service levels above that These rates
 stayed in effect until January of 1985.

 Ordinance number 112942. effective in August of 1986, introduced/defined new service
 level options.  After this point, a  term "units" was introduced, and bags, bundles, and
 cans all counted as units. The old two cans and two bundles became a service level
 of four units.  In addition, ail increments became valid - increments of two additional
 units (the old, add a can and a bundle) were no longer ail that were available.

                 Table 3.  Monthly Single Family Rates, 1986-1989
                               Variable Can Service
                                     1986         1987        19894
  Zero can service:                   $1.50       $ 1.50      $ 5.95
  One unit (can) par week:            $11.85      $13.55      $13.75
  Two units per week:                 $15.15      $18.55      $22.75
  Three units per week:               $18.45      $23.55      $31.75
  Four units per week:                $21.75      $28.55      $40.75
  Additional Units:                    Add $3.30   Add $5.00  Add $9.00
    41989 rates are for curbside or alley service. All previous rates are for
or carry-out service.
                                     V. 6

Multi-family Rates

Multi-family rates between 1981 and August of 1984 differed depending on whether the
building was a duplex; a tri-plex; a four-plex;  or had five or more units.  The per-unit
charges were generally higher for smaller buildings.  By 1984, all multi-family buildings
were charged the same per-apartment rates.  However, until 1984, the  charges were
not very volume-based, and the service level options for these buildings were few.

In 1984, the same service options as  single family buildings, but on a oer-apartment
basis, became available to multi-family customers, increasing waste reduction incentives.
However,  the apartment  owner had to decide  on the number of (whole) cans the
average apartment would  need, and then  had  to subscribe  to  that  number per
apartment. That is, a duplex could  subscribe to two or four or six total cans, and a
five-plex had no options  between five  cans and ten cans.  The rates for multi-family
buildings increased from approximately $3.40 per unit in 1981 (duplexes were close to
$6.00 per  unit) for multiple cans5 to $5-6 per unit in July of 1982 (with a charge a little
over $7.00 per unit for duplexes).  In  1984, when  more variable can options became
available and rates for  all multi-family units  were equalized, the one-can rate (per
apartment) was $5.40, with increments of $1.50/$3.00 for incremental service levels.

Dumoster  Rates

The City also contracts out collection  of residential detachable  containers.  The rates
for containers vary based on the number and size of  containers, and  the  number of
pick-ups per week.  In 1980, the rates for a  one-yard container picked up once per
week  (the most common dumpster service level) was $20.00 per   isnth.  A historical
series of the rates  for this service level are included  in Table 4.

                           Table 4.   Dumpster Rates
                      One-yarder picked up once  per week

                        pre-1980           $20.00
                        6/80               $23.25
                         1/81               $33.65
                        4/82               $32.45
                        8/84               $35.50
                        8/86               $50.75
                        6/87               $57.05
                         1/89               $64.30
    'However, service for buildings above four units was twice-weekly for the

                                     V. 7

 Periods of Rapid Rate Increases

 Figure 1 illustrates the time path of "basic"8 single family rates over time.7  Notice that
 although single family rates have increased over time, and recently have increased fairly
 dramatically, the real rate  actually fell over a significant period of time.  However, real
 increases have been experienced since  1982.

 Seattle introduced the variable rate system in 1981, and the City believes that the rate
 structure has been one of its most effective recycling programs.  However, the pattern
 of  rates and  impacts is'made up of  two periods.   In the early  period after the
 introduction of variable can  rates (1980-1985), rates increased tarty  slowty. Seattle's
 tonnage growth was held to  only 6% over that period (and tonnage fell in 1981, the first
 year after the introduction  of the new rates).  Over the same period, residential pounds
 landfilled  per  household  stayed virtually constant, and pounds per  capita fell 3%.
 Variable rates helped hold the line  on tonnage  growth.  The subscriptions declined
 fairly  significantly  in the early years,  far more dramatically  than did per-household
 tonnage.  The main reasons for this may  have been that the rates  were too  low for
 customers to pay much attention, and customers found that by compacting their waste
 they could use fewer cans to dispose of the same waste.

 Rates began to increase dramatically (over 80%) in the period between 1985 and 1987
 (from $7.45 per month for one can of service, to $13.55 per month in 1987 for the
 same service level).  The multi-family rates for one can increased 69% over the period.
 The differentials for service levels above  one can increased from $1.50 for the first and
 $3.00 for levels above that in 1985,  to $3.30 for each increment in 1986 and $5.00  in
 1987.  Rates for dumpsters increased 43% in 1986 and 124% in 1987 for the most
 common dumpster size.  It is during and  after  this  period that the most dramatic
 changes in tonnage,  subscriptions,  and recycling were noted. The rates seemed  to
 reach  a level  that caused customers  to take  notice.   In  addition, the recycling
 alternatives were starting to mature.   The  new  rates  were necessitated by increased
 tipping fees and financing the  closure of landfills. Awareness of recycling alternatives
 was increasing. Also, customer ability to compress the waste may have begun to reach
 its limit
    *1n this context, "basic" means the rates for -ie first real service level have been
graphed.  However, this does not represent the average bill.  Later discussions show
the time trend of average monthly bills.

    7The "base* rate  is used for the period until 1981.  After that, the illustration is
based on the charges for the one-can service level.

                                    V. 8

          Flg.1. Seattle's "Basic" Garbage Rates
                                       1M2  1MB 1M7 1MS
            Rg. 2. Self—Haul Automobile Trips
         1074   IfTt    ItTI    1MO    1

 Rates at the transfer stations and landfills also increased significantly between 1985 and
 1987.  The in-City automobile trip rate increased from free to $4.00 in 1986.  This, in
 addition to the almost tripling of non-City auto rates, caused a very significant dedine
 (to about half  the previous year's volume) in the number of automobiles using the
 transfer stations.  This drop in automobile trips is shown in Figure 2.

 Figure 3 shows the total cash and credit tonnage from 1975-1987. Per-ton rates at the
 transfer station increased from $29.50 in 1985 to $56.00 in 1987, a 90% increase over
 the period.   And per-ton rates  at the  landfill increased from less  than $5.00  in the
 1970s, to the $10-12  level during the early 1980s, to $22.00 in 1984, and to $25.80 in
 1985.  The landfills closed by the  end of 1986.

 These significant rate increases were each attributable to a major factor.  The mid-
 1986 rate increase was needed to cover significant costs to be incurred in dosing the
 City's landfills.  The 1987 rate increase  was largely a pass-through of the increase in
 rates charged  to Seattle to bring  waste to the King County Cedar Hills landfill. The
 City contracted with the County to bring waste to the Cedar Hills landfill after Seattle
 ceased accepting waste at its last landfill in 1986.  The tipping fees at Cedar Hills were
 increased from $11.00 per ton to $31.50 per ton.8

 Results of Volume based Rates and Rate Increases

 As the service  level choices increased,  Seattle residents got choices that were  doser
 and doser to volume-based rates.  In  addition, rate increases  provided very  visible
 incentives to decrease subscription  levels,  and presumably,  decrease  their  waste
 disposal volumes.

 Effects on Service Levels and Bite

 As mentioned before, Seattle's residential customers select a number of cans for their
 normal btflad subscription level. Figure 4 shows the shift in subscription levels over time
    *The $31.50 per ton charge includes several components.  $8.50 of the charge
represents contributions  to a  fund to plan  for future  waste disposal,  generally
earmarked for planning for an incinerator.  These  monies art contractually refundable
to Seattte if the City formally announces to the County that it plans to leave the County
waste disposal system and if the City  meets certain siting deadlines, etc.   The City
delivered that notification to King County in October of 1988 that it expects to cease
delivering waste to Cedar Hifls  by December  of  1992,  The  City's plans include  an
aggressive recycling program (with an eventual goal of 60% recycling by 1996), coupled
with hauling of  the remaining waste to a distant landfill.


              Fig. 3. Self—Haul Commercial Tonnage
              1970  1972  1974  1979  1979  1990  1993  1994  19M  1
            Fig. 4. Subscription Level  Distribution
                          Sngto Family

 for single family customers.   Clearly, the increase in rates, especially the 1986 and
 1967 increases,  led to significant increases in the percentage of customers on lower
 can levels (particularly the one-can level).  One additional factor, the new curbside
 recycling program that became available early in 1988, further influenced the downward
 shift in subscriptions evident in the figure.

 Figure 5 shows changes in the weighted average number of cans subscribed by single
 family customers between  1981 and 1988. The figure shows a dramatic shift downward
 in cans subscribed, decreasing from 3.5 cans in 1981 to fewer than 1.5 cans in 1988.

 Figure 6  shows the  average actual bill9 for single  family  customers.   It shows  a
 consistent pattern of customers working to  lower their bills after  a rate increase,
 achieved  through lowering subscription levels over time.   The figure also shows the
 average bill discounted by inflation.  Note that the average real bill increased much
 more regularly than the rates shown in Figure 3.  Recall that the table on rates included
 the rates for "basic" service -  the first can of service. However, as Figure 5 shows, the
 actual number of cans subscribed does not average one can. Rather, that number of
 cans has  been steadily decreasing.

 The Difficulty of  Cans vs. Tons

 One  continual  problem in the area of rate-setting for solid waste  is the disparity
 between the measuring unit by which revenues (and rates) are established, versus the
 unit by which costs are incurred.  The  Utility charges for waste  in  units of "cans" - a
 volume-related measure.  However, tipping fees and many other operating costs are
 incurred based on weight  These two factors are not always directly related.  Two main
 ways in which the relationship between  cans paid for versus tonnage disposed can be
 diluted include:

  o   customers putting out more cans than they pay for (enforcement efforts in Seattle
      have traditionally been  low).
  o   customers compacting waste,  either mechanically or by 'stomping', in order to
      get more  pounds in existing cans.10
    *as opposed to

    10There are several additional ways in which this relationship can be affected:
customers may stash the waste in other residential dumpsters, for instance. However,
one other factor is that the composition of the waste being disposed may be changing.
Customers may be tending to dispose of denser, heavier waste in their garbage cans,
and the proportion of fighter, higher volume materials may be declining.

         Rg. 5.  Weighted Avg. Number of  Cans
                            71  H  en
                                             i  i i  i *  i
              Fig.  6.  Average Garbage Bill



 Tonnage Results

 Figure 7 shows the total residential  tonnage disposed  in Seattle from  1968-1988.
 Tonnage disposed in Seattle fell during the earty 1970s due to a significant recession
 in the local economy.  Total residential tonnage was over 190,000 tons in 1970 and
 declined to a trough of  about 171,000 tons in  1974 and again in 1977.  Tonnage
 increased sharply in the late 1970s and then decreased again to 173,000 tons in 1981,
 and increased steadily through 1986.11

 Figure 7 demonstrates that, in  fact, over the period of the 1980s after the introduction
 of variable  can  rates, while subscription  levels were declining,  residential tonnage
 disposed was generally growing. Although the rate design and increases were effective
 in reducing subscription levels, tonnage  disposed did not decrease. In fact, tonnage
 disposed increased 9.9% between 1981 and  1986.  However, this uni-vanate look at
 tonnage is not sufficient to understand what is going on.

 There are  several important things to consider in analyzing this  result.   First  the
 tonnage tracked is disposed tonnage,  and not the volume of waste generated.  Seattle
 has collected information on City-wide recycling percentages from 1976-1987.  Figure
 8 shows that recycling has increased from around 14-15% to over 26% in Seattle after
 the advent of volume-based rates.  This implies that tonnage generated  grew faster
 than Seattle's disposed tonnage. Seattle's variable can rates were likely a significant
 factor in decreasing the amount of waste that  would have been disposed without
 variable can rates.

 A second piece of evidence on the effectiveness of Seattle's rate structure  is shown in
 Seattle's tonnage forecast equation.  Seattle's muiti-variate residential tonnage forecast
    11  For reference. Seattle's population declined from 1970 through 1973, and the
number of households did not match  1970 levels again until 1979.  The number of
households in Seattle increased almost 13% between 1971-1986, and almost 5% since
1980.  Ratios of pounds per resident and pounds per household were at their highest
in 1969-1970, reached tows in about 1974, and did not reach the previous peak values
again until 1982. Although population has remained fairly stable since 1981, measures
of households, pounds per household, and pounds per resident generally have been
increasing in the period 1982-1986.   The ratio of pounds of  refuse  disposed per
household fell dramatically after the increase of variable can rates, and has increased
slowly  since that time (about 7% total  increase through 1988).  The ratio of pounds
disposed to household income has increased 7% between the introduction of variable
can rates and 1986.  Finally, household size in Seattle has been declining from about
Z47 persons per household in 1971  to 2.15 in 1980 to 2.02 in 1987.


             Rg. 7.  Residential  Tonnage  Disposed
     180 "
     100 -
      •0 -
      •0 -
      20 -
      10 -
                                        »   I   I   I   I   I
       IMS   1070   1f73   1174  1871   1971   1880   1883   1184   1888
            Rg. 8. Seattle Recycling as a  Percent

         1878   1178   1881   1
                                1884   11
1888   1887

 is based on the assumption that several factors jointly influence the amount of tonnage
 disposed.   The statistical  analyses  showed the  following  variables were  most

  o   household income;13
  o   household size;14
  o   secondary recycling market prices15;18 and
  o   a measure of rates.

 The rates variable was shown to be negatively related to the amount of waste disposed.
 As the rates increased, customers disposed of less  waste holding all other factors
 constant   Presumably, many  customers recycle, others  may buy  selectively.  The
 estimated elasticity was -.14, which implies that as average rates increase 10%, waste
 disposed tends to fall by 1.4%.

 Although  there  are  other  factors  that  influence the disposal  of  waste, including
 convenience of recycling programs, age distribution effects, weather, etc., these were
 the most significant variables found in Seattle's analyses.
    12The estimations were performed  over the period 1971-1987.   The dependent
variable was first differences in logs of annual  pounds per household.

    13  This variable was positively related to the amount of waste disposed.  As
income rises, people (buy and) dispose of more waste. The estimated elasticity was
+0.59, which implies that with every 10% increase in income, 5.9% more tonnage was

    "Household size was positively related to waste disposed, implying that bigger
households disposed of more waste.  As expected, the coefficient was smaller than
one, which implied that  tonnage goes up less than proportionally with additional
members in the household. The coefficient was 0.72, so as household size doubled,
waste disposed increased by  72%.

    19The newspaper price was used as the proxy for overall recycling market pnces.
The tonnage drawn away is not, however, assumed to be newsprint only. Rather, the
newspaper price was a stronger variable than aluminum and other secondary pnces

    19  Recycling market prices had a negative effect on waste disposed - that a. as
the price paid for recycled newspapers increased, the amount put in the waste stream
decreased. The estimated coefficient was -.03, so as secondary prices for newspaper
increased 10%, 0.3% more tonnage was drawn away from the waste disposal stream

These results imply that prices/rates have had a negative influence on the amount of
waste disposed in Seattle holding the other factors constant. Apparently the increase
in Seattle's households and income, and the behavior of the recycling markets have
swamped the  negative price effect.  So although a simple comparison implies that
waste disposed has not fallen, it is quite dear that the waste disposed is lower than it
would have been without Seattle's rate structure.  It is unlikely that a significant price
coefficient would  be found in jurisdictions in which customers pay no bills  - areas
where garbage costs are buried in the property tax or some other method.

In addition, exploratory analyses were conducted to try to separately identify the effect
of variable can  rates.   We  found that the  size of the price coefficient increases
dramatically in size and significance when the estimation period is split in two - before
vs. after the introduction of variable can rates.

Finally, recent data present an even more positive picture.  We have found that tonnage
disposed, ratios of tonnage to population, and ratio of tonnage to households have
decreased in the  1987-1988 time period. We expect that these results are attributable
to reactions to the significant rate increases over the period,  the increased attention on
the problems of landfills and on  recycling as  an alternative, and the introduction of
convenient, Utility-sponsored recycling programs.

These results - the increase in recycling, the negative price effect of tonnage disposed,
and the greater  significance of the price effect after the introduction of variable can
rates  - provide  evidence  that variable can rates have indeed led to a decrease in
Seattle's tonnage disposed over what it would have been without volume-based rates.

Illegal Dumping

One important factor influenced by Seattle's rate design and level is the problem of
illegal dumping.   Unfortunately, reliable data on illegal dumping are  very difficult to
obtain - most of the information is incomplete and anecdotal. Tracking illegal dumping
is a  nearly intractable  problem - there are so many  leaks" in a garbage  system.
Customers may dump in ravines,  other garbage cans, streets, vacant lots, parks, etc.
Not all the waste is collected, and determining tonnage would be difficult In addition,
identifying the  source of the tonnage  (City-originated or not) is not usually easy, and
that can  be important in  a larger metropolitan area with  several separate garbage

However, our sense has been that some problems were experienced during the period
of rapidly rising  rates.   Certain  charitable  organizations  in the area  reported that
unwanted donations and garbage left at unattended drop stations increased s*gn
 difficulty of getting hd of large-sized items (sofas, etc.), and possibly the inconvenience
 of changing subscription levels to take account of excess seasonal waste (yardwaste).

 As a mitigation measure, the City  Council opted to  allow a lower dumping fee for
 certain  charitable  organizations to try  to  lessen the negative  impacts  of Seattle's
 increasing rates on  these  organizations.  In addition, Seattle introduced  a pre-paid
 sticker program in mid-1987 to handle some of the excess waste problems, and expect
 that it can provide a convenient alternative for honest customers.

 The only other information available tracks for only the last two years, and those data
 track only the tonnage collected by one particular City department After  one recent
 rate increase, the  City department responsible for street maintenance began keeping
 track of the tons of waste collected during their cleanup activities.  However, the data
 show no particular pattern in tonnage  of illegally dumped  materials.  This may be
 because the statistics have not been  kept long enough, because the maintenance
 crews pick up waste irregularly, or because the bulk of the illegally dumped waste is
 deposited in places  where these crews do not encounter 1 Although the Utility will
 continue to try to monitor the  effect of its policies on illegal dumping, this remains an
 area in which little information is available.

 Enforcement Procedures

 Historically,  Seattle's service  level  enforcement  efforts  have  been  low.   Limited
 enforcement of variable can service levels (except zero can)  is performed.  Inspectors
 monitor complaints  (both from customers and the collection  contractors),  monitor
 customers on vacancy rates, and provide periodic zero can  inspections.

 The collection  contractors have historically not carried  route books,  and relied on
 "knowing the routes' to know how many cans to pick up at a residence. This has led
 to a problem with the number of cane being paid for not necessarily related to the
 number of cane  picked up.   This  has further "muddied"  the  relationship between
 numbers of cans subscribed and tonnage.

 In addition,  it has been dear that  subscription levels have been declining over the
 years, presumably in response to increasing  rates and  increased emphasis on
 recycling. However,  the decreased subscription levels may or may not be reflected  in
 an actual decrease in the number of cans actually put out for collection.

There have been at least three surveys of service level compliance conducted by the
solid waste utility in recent years. The surveys have generally shown between 14-22%
of customers are placing out more cans for collection than they pay for.  There appears
to be seasonal variation, with higher violation percentages during high yardwaste times.


 However, also noteworthy was the fact that there nearly equal offsetting percentages
 of customers were putting out fewer cans than they were paying for.
                     1.2 SEATTLE'S RATE

This section discusses the characteristics of Seattle's garbage rates as of the 1987-
1988 rate period.  A description of important aspects is presented and discussed.  The
following section discusses an analysis of the weaknesses of the system, and the  final
section  discusses  the  changes to  the  system  and  rates  that were  made for
implementation of a new system  in January 1989.

Cost Allocation - 1987-1988

The rate structure takes a modified average cost approach to rate setting.  Costs are
allocated to specific customer classes  based on the cost of providing service to these
classes.  After this allocation, a downward adjustment is made to the rates charged at
the transfer stations (i.e., the commercial self-haul rates)  in order to remain competitive
with other disposal  options in the area.  This results in an upward adjustment of the
residential rate categories.

Most costs tended to be distributed based on tonnage, unless there  is a reason not
to do so.  For instance, landfill closure costs, which must be recovered, have been
concentrated on the first can charge.  Billing costs, which are account-related  and do
not  vary with tonnage  put  out  are  also  placed  on the first can charge.   Costs
associated with transfer station weekend hours are assigned to automobile rates, as
they are the major users of the transfer stations on weekends.  The costs of  the low
income  utility credit program are assigned to like rates - that is, the credits associated
with one can are assigned to the regular first can  rate, those from second cans are
shared by the second can charge, and credits given to dumpster customers are shared
by  other  dumpster customers.   After  costs  are  allocated,  a proportional  upward
adjustment is made to factor  in the costs of taxes and other costs.

Components of Variable Can  Rates in 1987-1988

The fee for variable can customer has three components:

1)    a customer charge,
2)    a first-can fee, and
3)    an additional fee  for each additional  can.

In 1987-8, these costs are, respectively, $1.50, $13.55 (including  the $1.50 customer


 charge), and $5.00.   The  customer charge  recovers  billing costs and residential
 inspection  costs.  The fees  per can allocate the remaining costs to be recovered by
 variable can  customers based on an assumed weight per can17.  This  is due for the
 most part to the method of  recovering the costs of the residential collection contract.
 The greatest percentage of these contract costs is allocated to the first  can based on
 the  assumption that  the additional  cost of  picking up  additional  cans, once  the
 collection crew and truck are already there,  is less than  the cost of getting there.
 Currently the costs are split 87.5 percent to 12.5 percent  Customers  requiring
 occasional pickup of "extras" beyond their subscription level may purchase stickers for
 this purpose from the Utility.

 Figure 9 shows the components of the first can rate under the cost allocation scheme
 used in  1988.  Landfill closure costs made up over $2.30 of the charge, billing and
 collection, about $1.37, general and administrative, about 51 cents, and the low income
 subsidy was over  one dollar of the first can rate.  In 1988, the portion of  the one can
 rate attributable to payments to the collection  contractors was $4.56, or  over 33% of
 the rate.  Disposal and transfer station and hauling costs, totalling about $2.50, were
 the only costs that were in  a sense, variable.  The costs of planning and executing
 recycling programs was  included in the tonnage portion of the rates.  An estimate is
 that approximately 65 cents  of the first-can rate was attributed to recycling.

 Detachable Container Customers

 The rate structure for detachable container customers is broken into five components:
1)    an administrative charge,
2)    a "rental" fee for the use of the detachable containers,
3)    a charge per pickup,
4)    a charge tor the number of pickups multiplied by the number of containers, and
5)    a tonnage  charge.

Uke the variable can rate, the administrative charge is a flat charge per account which
recovers bffng costs and residential inspection costs.  The  rental charge is levied on
each detachable  container, and is  equal to the cost of the container divided by its
estimated useful  fife.  Collection contract  costs are allocated as  a function  of the
number of pickups requested  and the number and size of containers.  All other costs
levied against detachable container customers are levied on tonnage (estimated by the
number and size  of the containers multiplied by the free ency of pickups).
    "Estimates of average weight per can have averaged between 20-22 pounds per
can over a number of years of rate studies in Seattle.


Seott.e'3 1988 One Con Rote
        by Coat Center,
                                               BUIIng. •"
                                           . (I0.1X)
            Total One Can
                  Rate  ~ $13'55

 Commercial Customers

 The Solid Waste Utility's commercial customers consist of customers self-hauling waste
 into utility-owned transfer stations18. These include entities such as private haulers and
 landscaping  and  construction companies.   All  cost  allocation for the commercial
 customers is based on tonnage.  However, as previously mentioned, the rates for this
 customer class are subsidized to be below full cost-of-service.  This  is because there
 are  competitive alternatives for these customers, and as long as the  rate is set above
 the  variable  cost  of service,  the  Utility is better off retaining this customer class's
 business.  The difference between the total cost of serving this customer dass and the
 rate which is charged  for commercial tonnage  is allocated  to the  other customer
 classes.  The rate in 1988 is  $56 per ton.  King County, which has several transfer
 stations in the area, charged $47 per ton.

 Subscription  Alternatives for Multi-family Buildings

 Multi-family buildings may subscribe to variable can or container service.  For variable
 can customers, landlords select service levels, which is in the form of a number of cans
 per  unit to be applied across all units in the building. Landlords are then billed for the
 building's total subscription level.

 Multi-family rates  in 1987-1988 are  lower  for the  first can than for single  famiry
 customers by $4.  After the first can,  increments  for additional cans  are the same as
 for single family customers.  It was assumed that there was a lower cost of service for
 multi-family customers because of the likely "clustering* of cans that would tend to occur
 in multi-family buildings.

 Sticker  program

 In September, 1987, the Solid Waste Utility instituted a Prepaid Extra Garbage Sticker
 Program. This program gives ratepayers an opportunity to occasionally increase their
 pickup service. When they have an unusual volume of garbage, they can purchase a
 sticker for $2.50 On blocks of two  stickers), fasten one to each additional bundle,  and
 have it picked up with their regular garbage.

 Summary of Major Features of the 1987-1988 Rates:

  o   Rates were  set approximately at cost-of service.
    1$Again, not to be confused with the commercial businesses at large, who contract
with private haulers to nave their waste removed.


  o    Customers pay  more to put out additional waste.   Additional  cans cost $5,
       providing a moderate waste reduction incentive. The basic rates for one can are
       relatively high, ($13.55), which makes the marginal $5 per month for additional
       cans a lower incentive than  it  might  have been.   The service provided is
       backyard, or "carry-out" service.

  o    If  customers need  to  put out additional waste, they can  purchase pre-paid
       stickers for $2.50 and attach them to excess waste.  However, this program has
       not been very effective because of the lack of enforcement and the low incentives
       for contractors not to pick up unpaid waste.

  o    In early 1988, the City instituted a convenient curb/alley recyding ^r>gram for no
       additional fee - the  -"        nrogram was embedded  ir      rasjc rates.
       Participation in the ..                 v, and all dwellings with fewer man 5 units
       are eligible for the progi a.
                  1.2 RATE AND PROGRAM CHANGES IN 1989
Analyses of svstem-wide changes for 1989

Several factors made the 1988-1989 timeframe a pivotal period for changes in Seattle's
solid waste system.   First, a milestone in the landfill contract with Kirv C~Unty  for
disposal of the City's waste at the Cedar Hills facility was imminent          "ad to
make a choice on its long-term disposal choice by October, 1988.  «>.*• «-.,,.> earned
out an analysis of several waste %|posa1 options:

  o   incineration plus landfill;
  o   recydng plus landfill; or
  o   largely landfill.

A large integrated planning effort, resurcn,,   , a comprehensive Environmental Impact
Statement (BS), was  conducted by the Utility.  The process involved examining  trie
technical  and siting considerations of an incinerator.  It also examined recyding as an
alternative waste reduction resource  in the same manner as electric  utilities have
considered conservation as an alternative to building additional  generation capacity
These  analyses  assumed that  significant  capital  investments could  be put into  tne
recyding and waste reduction programs, much as they micr  temativeiy have been
put into developing incineration or additional landfill space.

 After extensive analysis and a public hearing process, the City decided to pursue the
 second alternative.  Seattle has  established a series of aggressive recycling goals,
 aiming toward 60% as the recyding/waste reduction goal. This, in combination with
 contracting for distant landfill space, has been determined to be the most favorable
 alternative in terms of being environmentally sound and in lower systems costs than
 would be experienced under the  status quo system.

 Two additional opportunities for changes in the system also became available.  First,
 a new billing system will be implemented within the next two years. This presents  an
 opportunity to introduce more flexibility into the rates structures billed through the UBS

 Second, the existing residential collection contracts expired at the end of 1988.  An RFP
 was issued to solicit proposals for new collection contractors to begin in 1989 for a 7-
 year period.  Changes associated with the negotiation of new collection contracts for
 the period 1989-1996 imply changes in methods of collection, enforcement implications,
 and had implications for the design and calculation of the 1989 rates.  The collection
 contract for 1989 calls for several changes in service. Curbside pickup will be provided
 as the basic method of collection, and other changes will greatly enhance the ability to
 monitor service levels and tighten the link between cans subscribed and tonnage.

 Besides the conversion to curb/alley as the basic service method and the addition of
 yardwaste and bulky torn services, there is on* other major rate-related change in the
 1989-1996 collection contracts.  Rather than paying the contractors fees that are based
 almost entirely on  the number of  households served, the new contract makes 50% of
 the fee paid to the contractor based on the number of tons collected. This means mat
 the collection  payments  wifl decrease  as recycling and waste  reduction cut into the
 volume  of waste disposed.  This  provision allows more savings from waste reduction
 to be passed on to customers as added incentives to reduce waste, and allows  more
 of the charges to  customers to be tonnage based, rather than fixed in nature  This
 increases the waste reduction incentives available within the rate structure.

 Corv^^rns about the Structure of  Current Rate Design

 The existing variable can rate structure  was determined to be  inadequate m several
 respects.   The high  first can  fee and  relatively  small additional can fees  did  not
sufficiently encourage recycling, a major  City goal.  Customers who do recycle nad to
pay for one can  even if they needed  less.  New programs (yardwaste.
collection) required modifications  to the rate structure.  Alternative methods of
for extras required biffing structure rrxxiificatjons.  The rationale and methods tor uEH
credits needed reexamination.   Also,  there  was  a desire  to keep rates  and  the
corresponding analysis simple.

 In addition, there was  an equity  problem related  to  how  multi-family variable can
 customers are billed.  The UBS billing system could not charge different units in the
 same complex for a different number of cans.  For  example, a  duplex account  could
 be charged for two cans (one per household in the duplex), four cans, six cans, etc.,
 but could not be  charged for three cans.  Changing  this convention would require
 changes in some of the UBS programs.

 The 1988 Rate Structures Analysis

 A January, 1988 study by Solid Waste Utility staff (SWU, 1988a) examined alternatives
 for the  structure  and  design of solid waste  rates.   This  analysis  was conducted in
 preparation for changes  upcoming in 1989/1990, including response to a new collection
 contract, new services, and desired directions for rates for the 1989/1990 rate period.
 This paper examined the following issues in particular:

  o   an evaluation of changes to  the current rate  structure to encourage recycling,
      including pre-paid bags, an expansion of the existing variable can structure to
      include a mini-can rate, and bi-weekly collection;

  o   an evaluation of whether rate differentials for  backyard vs. curb/alley collection
      service should be introduced;

  o   evaluation of the relationship between single-family and multi-family rate structure
      policies, as welt as the equity of billing policies for ratepayers who share me
      same multi-family unit

  o   evaluating  alternative  policies for  mitigating  rate impacts  on  low income
      customers, and

  o   simplifying  the rate structure.

 1989/1990 Rate Study

 In 1988 the Utility also conducted a rate study (SWU, 1988b).  The  1989/1990 Sot.a
Waste Rate Study provided the first in-house rate study at the Solid Waste Utility  The
analysis consisted of four parts:

  o   analysis of demand for each customer sector, including estimates of ten rage
      disposed and recycled, and forecasts of subscription levels after adjustments 'or
      price and tonnage-diversion effects;
      analysis of revenue requirements, including calculation of required rate
      as a function of budgeted costs, projected tonnages, projected revenues ana


       financial constraints;

  o    cost allocation analysis, analysis of distribution of revenue requirements elements
       between and within customer classes; and

  o    rate design analysis,  including  decisions on  the  forms and  relationships  of
       charges for all types of  rates, including variable  can rates by  customer class,
       differentials for backyard/curbside rates, dumpster charges and differentials for
       compactors, and transfer station  rates.

A separate analysis was done by the City Council staff on rate alternatives for another
special group of  customers - the charitable organizations (Goodwill,  etc.), who have
to dump large volumes of waste as part of their operations.

These studies were conducted with several goals in mind.  The Utility wanted rates that
provided significant and consistent recycling incentives, and wanted to give customers
greater control over their bills.  Rather than having a set package of services with the
charges  embedded in the basic rates  (as in 1987-88), the Utility wanted  to expand
service level choices, provide extra services priced separately on a fee-for-service basis,
and allow customers considerable flexibility in  service packages. This would have the
effect of allowing  customers to choose the service they needed, and give them a more
direct relationship between the actions  they are willing to take (in terms of recycling,
waste reduction, yard waste separation, and taking cans to the curb),  and the bill they
pay.  In  addition, the  studies carefully  assessed the interactions between programs
offered and pricing incentives to be sure that consistency was attained, and that the
waste  reduction message was  dear.
                          ALTERNATIVES CONSIDERED

The Utility considered the following alternatives:               A

  o   simpfifying the rate structure, including flat rates, or charging as if a "can is a
  o   recycflng credits
  o   prepaid bags or stickers - methods of prepaying for 'extras*
  o   optional vs. mandatory curb/alley pickup
  o   biweekly pickup
  o   introduction of a lower "mini-cart1 service level
  o   reexamining zero can  policies
  o   charging or not for yardwaste programs, and the best method for charging
  o   rates for compactor containers
  o   increasing the flextoifity of subscription level alternatives for multi-family customers


  o   rate policies for low income customers
  o   relationships between prices for the service options

Evaluation Criteria

The Utility analyzed rate design and structure options in terms of a set of evaluation
criteria, or goals for preferred rate design:

  o   Recycling and Waste Stream Reduction Incentives  - Rate structures  should
      encourage recycling activities and enhance waste stream reduction  programs.
      This also includes effects that pricing strategies may have on illegal dumping.

  o   Equity and  Economic Efficiency  criteria - Preferred rate designs should be
      perceived as fair and equitable, cost-based, and provide  price  signals that
      encourage efficient use of the resource. This includes fair apportionment of costs
      among different consumer  groups.  Efficiency refers to effectiveness of  pricing
      signals in controlling  the use of the  sen/ice, and in controlling the usage of
      different types of service.   Immediacy of the pricing feedback is one important
      aspect of the pricing incentive.

  o   Customer service,  stability,  and acceptability  -  Rate  structures must be
      acceptable to the Solid Waste Utility,  and the community.  The rate structures
      should enhance  rate stability for customers classes, with a minimum  of
      unexpected  changes  which would adversely  impact existing customers.  Rate
      design should enhance the customer's ability to choose and manage  service
      levels. Preferred rate designs are understandable and can be easily explained
      to customers.  Comparability of the structures  with other jurisdictions should also
      be considered.  Citizens should be allowed timely opportunities to review and
      comment during the decision process.

  o   Implementation/maintenance criteria - Preferred rate designs are understandable,
      calculable, unambiguous in coverage and interpretation, and integrate easily into
      existing billing, contractual,  and financial constraints.  Costs of implementing and
      maintaining the rate-related infrastructure should be low.

  o   Enforcement -  Preferred rate  designs should  require  minimal additional
      enforcement efforts.  The rate design and units of charge should be well-defined
      and  unambiguous, and allow straightforward  enforceabiiity.

  o   Revenue-related criteria - Rate designs should recover the costs of proving the
      service and provide reliable revenues.  This includes effectiveness in yielding total
      revenue requirements, predictability and stability of the revenue stream over time,


      minimizing cash-flow constraints, and enhancing the Utility's financial position.
      There are several revenue-related criteria that often work at odds to one another.
      One is the stability and predictability of revenue from customer rates.  Another
      is the degree to which  revenue generated will track or recover the costs of
      collection, disposal, and recovery as these vary with waste volumes, even though
      neither revenue nor costs are easily predictable. Rate options which score high
      on the first test generally do poorly on the second, and vice versa.

One additional constraint that was applicable to the short-run recommendations of the
study was that rate structure changes for the 1989/1990 rate period needed to be able
to be modeled by the current billing system. Because the billing system was slated for
overhaul just after this  period, major structural changes could  not be implemented in
the short-run.
Recommendations on Rate Design

The  Rate  Structure  study  (SWU,  I988a)  made  both short-run  and  longer-run
recommendations about rate design.  The rate study implemented  all the short-run
recommendations. The recommendations  from these studies are summarized below.
The adopted 1989/1990 rates are listed in  Table 5.

Backyard vs. Curbside Pickup:

  o   The  Utility  recommended charging  a rate differential between curbside and
      backyard service, and allowing voluntary choice of curb/alley or backyard service.
      Maintaining  customer choice and not selecting mandatory curbside service
      provided greater customer service  and eliminates the need  for complicated
      exemptions process for elderly,  infirm, and households with hilly terrain.

  o   A  backyard premium  of  40%  over the  curb/alley rate was  imposed.   This
      premium represents about double the additional cost of serving these customers,
      but provides a significant incentive  to bring  waste to the curb and eventually
      lower coflection costs.

Basic Rats Structure:

  o   In the longer run, customers should  be charged an amount based on the actual
      weight of  the  waste  picked  up  (with  a customer charge and  frequency
      components added).   This would be more  efficient  at encouraging recycling
      because customers would have an  incentive to reduce waste to any level, not
      just to the lowest can service level.  Because existing  technology cannot handle
      this alternative,  an alternative recommendation follows.

                                 .   V.28

In the meantime, residential rates should be in the form of a variable can rate
rather than a fixed fee to ensure a low-cost correlation between fees and service
provided. This gives customers control over the size of their bill and allows them
to select the service level  and options most appropriate for them.

Variable  Can  Rates were maintained as the basic  residential rate  structure.
Variable  can rates have provided effective waste reduction incentives in Seattle.

The charge for higher service levels was significantly increased.  The second or
third can now costs an  additional $9, rather than 1988's $5.00 differential. This
was implemented to increase the waste reduction incentive.

                     Table 5.
                  Summary Table

                      Curb/Alley        Backyard
Minimum Chg              $5.99              n.a.
Mini-Can                310.70              n.a. -
On* Can                 $13.75            $19.25
Two Can*                $22.75            $31.85
Three Can*              $31.75            $44.45
Add'l Can*               $9.00            $12.60
 $5.00 each
 $2.00 p*r month (min 12 mo's)
Minimum Chg              $2.40
Mini-Can                 $4.30
On* Can                  $5.50
Two Can*                $12.70
Thr** Can*              $21.70
Add'l Can*               $9.00

  P*r Ton
  Minimum Charg*
          Clean Razardou*
          Green    Wa*t*
Charltabl* Organizations
  Per ton               $38.50
Recyclable* only
 $3.00 each

Recycling Credit:

  o   No additional recycling incentives should be offered through a recycling credit.
      The basic rate structure will provide pricing signals to encourage  recycling.
      Implementation of a recycling credit will discourage use of private recyclers and
      will not  reward those customers who  reduce waste  through non-recycling
      methods (conscientious buying practices, etc.).  Participation is difficult to define.
      and no incentives for higher levels of recycling  are provided.

Charging for Extras:

  o   Because the billing system  is somewhat inflexible in the short run,  the Utility
      recommended  continuing and expanding the use of a pre-paid sticker system
      to charge for extras.  This requires no modification to the billing system, but still
      maintains the incentive to keep waste low.   If the billing function is transferred
      to  another  agent, the option may be reexamined based  on the  proposed
      package. Stickers provide a more immediate pricing incentive for recycling (bills
      arrive two months later). Compatible enforcement is provided as part of the new
      collection contract  Incentives not to collect  unstickered waste  (in the form of a
      revenue-sharing arrangement) were written into the  •  ection contract.   In
      addition, the Utility recommended allowing                der stickers by phone,
      and in addition, expanding their availability           Jets,  tf easy  access to
      recycling  and stickers does not  adequately  adorw^s the problem of  increased
      dumping, the Utility will consider revising the recommendations.

  o   The "extra garbage stickers" program was continued and expanded.   The cost
      of these  stickers was increased  (to $5 each) to cover the cost of  service
      including a commission to the retail outlet (negotiations are currently proceeding
      with the 7-Qeven chain to offer these stickers), and the revenue-sharing fee  that
      is provided to  collection  contractors as an  incentive to only pick up stickered
      wast*.   The  pricing  was  also  examined  in  relation  to the differential for
      subscribing to additional cans.   The  cost is  more  nan  subscribing to an
      additional can, and  provides an incentive  for  customers to keep waste to  a


  o   The Utility recommended  charging for the yardwaste program  in order to
      maintain incentives for backyard composting. Both a sticker system and charges
      that would appear on the bill were considered.

  o   The Utility w^s  able  to implement a curb/alley  yardwaste collection program  m


      1989.  Because of the potential large number of stickers that might have been
      needed, it was decided that a  subscription system for paying for the service
      would be more practical.  To provide an incentive for customers to subscribe,
      a low  rate was desired.  However, to continue to provide  an incentive for
      backyard composting (the cheapest method of getting rid of yardwaste), some
      charge was needed.  The Utility imposed a $2 per month fee  (year-around, so
      monthly rates could be low) for the service.

Low Subscription Alternatives - Mini-Can/Zero can:

 o   Biweekly collection should not be provided as  a service alternative. The current
      health code requires weekly collection of putresables.

 o   A new "super-recycler* rate, allowing  for a mini-can service  level, should be
      introduced and widely advertised.  Contractors should provide  these cans. The
      rate should be priced to encourage recycling and the option provides a realistic
      service option for low waste generators. The service option also does not favor
      one particular method of waste  stream reduction.

 o   A new "mini-can" service  level  was introduced.   This tower  service level (19
      gallons per week) was priced at about 20% less than the 1988 (and 1989/1990)
      one can service rate. This rate should provide a significant incentive for waste
      reduction for customers who were previously stuck with no realistic service levels
      below one can, but were not filling one full garbage can.
 o   The Utility had introduced a no-service alternative (called the zero can rate) when
      it introduced variable can rates in 1981. The qualifications for the zero can rate
      were very stringent, requiring customers to produce no waste  (in addition, they
      were not allowed  to bring waste  to  transfer stations,  use other customers'
      garbage cans, etc.).  However,  the zero can rate provided a tow-rate incentive
      to customers who truly produced no waste. However, the rate was subsidized •
      - the reduced rate did not cover many of the fixed costs of the) system, and did
      not even cover the billing or  inspection costs  associated with  these customers.
      To be)  fairer to other customers, the Utility  recommended strengthening the
      requirements for the  rate, and considered termination of the program.

 o   As part of the 1980/1990 rate implementation, the zero can  service level was
      eliminated.  The Utility recommended that new qualifications for the zero can rate
      should be  discontinued, but that  existing qualified zero canners  should be
      •grandfathared in".  Although the zero can program was a good model for what
      could bt dona  in the extremes of waste reduction, the subscription alternative
      was discontinued for several reasons. The qualification criteria made the service
      level  unrealistic tor moat customers and had  resulted in a program for an elite


      few, the program  was experts       administer,  the  rate being charged was
      significantly  subsidized,  and tt-        -iini-canu rate  was determined to be a
      more realistic and  achievable ser      /el.

Multi-family Variable Can  Rates:

  o   More flexibility for  multi-family can levels should be  allowec        ine  billing
      system.  The current system of allowing owners of  multi-family building only
      subscription levels  equal to multiples of the number of units should be modified
      to allow more continuous subscription levels.

  o   This flexibility was  added to the UBS system and rates established for all new
      service levels.  Giving these customers more service level flexibility is expected
      to increase their incentives to reduce waste.

  o   In addition, the 1989/1990 rates eliminated the differential between multi-family
      and single-family first-can rates.  The revised estimate of cost-of-service  under
      curb/alley pickup was very small and did not justify the continuation of the $4
      differential in first can rates.

Detachable Container Compactor  Rates:

  o   Higher rates should be charged to detachable container customers who compact
      their waste.  In the short term, bill  compacted detachable container  customers
      at a higher level to reflect the increased cost of service. In the longer  run,  a
      separate rate should be implemented for these customers.
  o   A  new rate for  compact*"1 *«»— ^ble container customers was introduced.
      Because these c- •                 •» -.onnage per yard than other customers,
      and therefore cc*                _^e,  a premium of  50% on  the  tonnage
      component of their rates «^    :ouced. The incentive to reduce waste remains,
      but the  growing disparity between revenues  and disposal costs  for these
      customers was reduced.

Variable Can Compacted Waste:

  o   Do not establish separate rates for variable can customer with compacted waste.
      Use weight maximums to  limit abuse.

  o   Weight limits were reduced for all can sizes.

 UEH Alternates:
       The current two-pan form of the subsidy is appropriate, tt gives these customers
       a lower "baseline" service level for a reasonable price, and gives additional, but
       smaller, discounts on additional cans.  It  is very flexible and provides adequate
       rate assistance to low income customers.

       The implemented rates maintained the low "baseline service" price, but truncated
       the discounts after  the second can.
 Other Items:
       Rales for commercial customers at the transfer stations continue to be priced
       lower than full cost-of-service.  These customers have  realistic alternatives to
       Seattle's transfer stations to dump their waste - there are several nearby transfer
       stations  operated  by King County Solid Waste that have  lower disposal  rates
       ($47). As long as these customers pay more than the variable component of the
       cost of service, these customers contribute to the fixed cost of running Seattle's
       Solid Waste system.  Therefore, the commercial transfer station rate has  been
       priced at $62.  This rate is  lower than full cost  of service, but  is above the
       variable  cost  It is economically sensible  for the  Utility to retain this customer
       class, because it reduces the fixed cost burden for the other customer classes.

       The Utility introduced several new services, including bulky item and white goods
       collection.  Separate fees were assessed for this service.
Recommendations on Cost Allocation

The Utility historically took a modified average cost approach to rate setting.  Costs
were allocated to specific customer classes based on the cost of providing service to
these classes.  After this allocation, a downward adjustment was  made to the rates
charged at the transfer stations  (i.e., the  commercial rates)  in order to  reman
competitive  with other  dlipotal options in the area,  This resulted  in  an  upward
adjustment of the residential rate categories.

Historically, most costs were distributed based on tonnage,  unless there was a reason
not to do so.  For  instance, landfill closure costs, which  nusi be recovered »*re
concentrated on the first can charge. Billing  costs, which are account-related  and do
not vary with tonnage  put  out were also placed on  the first can charge.   Costs
associated with transfer station weekend hours were assigned to automobile rates, as
they are the major users of the transfer stations on weekends. The costs of  tne tow


 income utility credit program were assigned to like rates - that is, trie credits associated
 with one can were assigned to the first can. those from  second cans were shared by
 the second can charge, and credits given to dumpster customers were shared by other
 dumpster customers. The costs associated with the recycling programs were included
 in the standard rates.  After costs were  allocated, a proportional upward adjustment
 was made  to  factor in the costs  of taxes and other costs.   Figure  10 shows  the
 distribution  of costs embedded in the first  can  rate for the 1987-1988 rates.

 Several changes were made to cost allocation  in 1989.  The  new basic one-can rate
 consists  of three  components: a "Minimum"  Charge,  a "structure11 charge,  and a
 'tonnage" charge.   The minimum charge  includes costs associated with billing and
 administration, landfill closure, recycling programs and planning, and the low income
 utility credit program.  All customers pay this charge ($5.95 per month), regardless of
 their service level.  This represents a change in rates for zero  can customers and for
 vacancy rate customers, who previously paid much lower charges. These charges are
 the "non-tonnage" related charges, and have no relation to the amount of waste picked
 up.  The "structure charge" is that share of the  collection contract that is invariant with
 respect to  tonnage - that 50% of the payments to the collection contractors that is
 related to the number of stops the trucks  must make.  Finally, the  "tonnage"  charge
 consists  of charges  for administration,  taxes,  disposal,  and the tonnage-related
 component of the collection contract A chart depicting the proportions of various cost
 components in  the first can rate is given in Figure 11.

 Another change in 1989 is the allocation of tow income utility credit program subsidies,
 which were modified from a more tonnage-related allocation  to be  spread across ail
 customers  on an account basis.   Recycling programs and planning were also placed
 on the minimum charge and assessed to all customers on an account basts,   it was
 not dear that allocating on a tonnage  basis was appropriate  because of the fact  that
 customers  with more waste would be  paying more for services they might seemingly
 not be using  as  much.  In any case,  since the programs were available to ail
 customers,  they are charged to ail customers.  Landfill closure was also allocated on
 an account basis.

 One other  main change is that the costs of the new recycling program, the cjrcside
yardwaste program, are being assessed in a separata fee, rather than  being  mouced
in the basic rates.  This helps retain the incentives for customers to backyard
which is a cheaper alternative for the Utility.

 However, the rates remained essentially cost-of-servica based.  The main

  o   the charge for extra cans  is higher than cost of service to provide a
      incentive for waste reduction;


               fig.  10. Seattle's 1989/90 One  Can Rate
                                   by Cost Canter
                Disposal (14.9%)
                                              Recjclinf (7.6%)
 .9tCollecUon (10.2X)
Admin;  iliac. (10.9%)
    Taxes; Mai Incoma (8.4%)
                                                            Landfill Closure (16.4%)
                                                               Bllllnf, etc. (10.2%)
                                                       UEH;  Taxes; Net Incoma (9.1%)
                                         .^Collection (ie.4%)
       Minimum Chf
Stoppluf Chf
Tonnaf« Chj

  o    the commercial rate is lower than total cost of service to retain the customer
       class and not lose them  to competitive alternatives; and

  o    the in-city automobile rate is priced below cost of service.

Service Level Enforcement Procedures in 1989  and beyond

The new collection contract calls for much stronger service level monitoring capabilities.
Indeed, to some extent, the system will be self-enforcing.  The contractors will provide
standardized toters in 19, 30, 60, and 90 gallon sizes.  These  official wheeled toters
reflect subscription levels  of mini-can,  one, two, and three cans.  The toters  greatly
simplify service level monitoring. Households are issued the toter appropriate to their
subscription level,  and any waste that is not in  the toter is easily identified  as  "extra".
Toters are reissued as service  level  changes are  requested.  The contract for  1989
includes provisions for service  level  monitoring, and contractors are bound to only
collect "paid" waste. Any waste not in the toter  must have a pre-paid sticker attached.

In order to increase the incentive not to pick up unpaid waste (unstickered  "extras"), the
new contract also institutes a 'revenue sharing' arrangement. For every sticker sold in
their area, the contractors will receive $1. This should increase the incentives for the
contractors to leave unpaid waste.

These new procedures should  help  lighten  up" the  relationship between  cans
subscribed and paid for, and likewise, should lead to a stronger relationship between
cans  subscribed and tonnage disposed.

Social Concerns about Mandatory Charges

Seattle was concerned about the effects of  mandatory (and significant) charges on
some vulnerable segments of its  customer population.  In 1975, the City instituted a
program of special reduced low-income elderly or low-income handicapped rates. In
1988, these customers received 77%  off their basic (first-can) service.   Savings off
additional cans were 22%.  This design provided basic service at a lifeline level, as well
as an incentive to keep waste  disposed low.  This system has the effect of  offering
inexpensive basic service yet retaining the waste reduction price incentives inherent in
the variable can  rate structure.  Customers are certified by the  Department of Human
Resources, notations are  made within  the UBS system,  and the rate subsidies are
accommodated within the current UBS system.  Re-certification is seldom necessary
because r-s particular segment of the population is unlikely to change  income, age,
or handicapped  status.

These discounts were decreased in 1989/1990 to 60%  off the mini- and first- can


 service levels, 20%  off the second can,  and  no additional discount on higher
 subscription  levels.  This change  implies that solid waste rates will rise more-than-
 proportionately for these low-income customers.  However,  the  City conducted  an
 analysis of low-income policies across all City utilities and found that the rate discount
 for electric, water, and sewer utilities were significantly lower than those for solid waste.
 In an effort to standardize policies across all utilities,  the City recommended that ail
 utilities move toward 50% as the discount for low income customers. Therefore, the
 increase in bills for solid waste service was  mitigated by the  increased discounts for
 these  customers from  the  other  City utilities.    In 1988, the  City also considered
 expanding these discounted rates to all low income families or low income families with
 children.  The City Council did not implement  the recommendation as part of the
 1989/1990 rates.

 The City  has offered subsidized dumping rates at the  transfer  stations for certain
 charitable organizations since 1986 (about 35% discount). It was determined that the
 rapid rise in the City's residential rates led to increased dumping of unusable items at
 the charitable drop-sites, and that  the increased tonnage had a detrimental effect on
 the charitables'  budgets  and abilities  to continue their operations.  This  discount
 continues through the 1989/1990 rate period.  However, for the longer term, the  Utility
 and City Council  are  working with other jurisdictions to construct a better and  more
 regional solution to the  charitables' problems.

 Although the Utility has  phased out its discounted "zero can" service level, the Utility's
 new mini-can service level should provide a more realistic lifeline" level of service to ail
 customers at a tower  rate (more than 20% lower) than was available before.

 Illegal Dumping

 Although reliable data on illegal  dumping are not available, we  anticipate that several
 changes associated with the 1989/1990 rates may help reduce the problem.  The pre-
 paid sticker program wi be much more widely advertised, and can handle some  of the
 excess waste problems and difficulties of changing subscription levels for occasional
 waste. Greater enforcement should increase use of the sticker program,  and we hope
 that it wi provide a convenient  alternative  for  honest  customers.  We  have also
 introduced a bufcy item and appliance pickup service which may help with large  items.
 In addition, the yardwasta program should eliminate the need  for awkward seasonal
 changes in subscribed service levels.

 However, realistically, the greater degree of enforcement may lead to increases in illegal
 dumping.   Customers have generally been able to put out  excess waste  with their
subscribed garbage and be able  to expect  it to be picked up.  With that tow-cost
alternative gone in 1989, we may see increased  iegal dumping.

In addition, there  is the possibility that  illegal  dumping will  be a side-effect  of the
introduction of the "mini-can"  of  service.   The rate is  20%  lower, which can be a
significant incentive.  Customers who regularly generate additional waste may continue
to subscribe to this alternative, and dispose of their excess in an illegal way.  We will
try to monitor these problems, but acquiring reliable data is expected to be problematic.

Seattle's Svstem - 1989/1990  Summary

The Utility believes that Seattle's system offers significant  recycling and waste reduction
incentives, and that  the rates, programs, collection system,  and  incentives  are well-
coordinated.  The City has had volume-related rates since 1981, and that has  been a
very strong incentive to recycle, witnessed by our baseline of 24% recycling before the
start of  any  Utility-sponsored recycling  programs.   The special "mini-can"  service
provides a reward for low volume customers and customers who use higher levels of
service pay a higher-than-cost-of-service rate for those additional cans - $9.00 extra for
each can greater than one.  Customers  have considerable choice over the types of
solid waste service they need, and these choices directly affect the level of their bills.
The Utility believes that offering a combination of rate incentives, convenient and efficient
Utility-sponsored recycling programs, and extensive public education will help us get
to our 60% recycling goal.

Rate Design and the Incentives Inherent in the 1989 Rates

The following paragraphs outline the pricing incentives inherent in Seattle's single family
volume-based rate design.

Recycling incentives:

  o   Pay more as number of cans increase.  1989 rates charge significantly higher
      charges  ($9) for additional cans.  This is an increase over the $5 charged  in
      1987-1988, and provides a stronger waste reduction incentive to every customer.

  o   Offered a tower subscription level  - mini-can.  Previously customers with less
      than one can  of waste  had few  incentives to reduce waste further.  Offering a
      mini-can option  provided financial incentives to reduce waste further.

  o   "Extra garbage  sticker* (or 'Trash  Tags").   For each  bundle or  unit of waste
      beyond a customer's normal subscription level, customers must attach a Trash
      tag*.  As you put out more waste you pay more.  These pre-paid stickers cost
      $5 each  ($£50 in 1987-1988), and  must be affixed to the waste in order for it to
      be picked up.  The sticker system provides a financial incentive to keep waste
      low, but  provides a  convenient  alternative for customers with occasional extra


  o    The trash tag" was priced to provide an incentive for customers to sign up for
       the correct service for "normal* service.  Customers on mini-can service can buy
       seven stickers per year before they would have been better off subscribing to
       one can of service.  Customers  on one can or more of service could buy 21
       stickers per year before it would  have been better to subscribe to an addrtionai
       can. Recall that the stickers provide 2Dfi weekly pickup of extra waste, and the
       extra can rate provides 4.3 weekly pickups per month.  Using stickers for each
       pickup per month would add over $20 to the monthly bill.  The trash tags are
       priced to encourage customers to subscribe to an appropriate normal level.

 Keep incentives for  Programs:

  o    Charge of $2 for the curbside yardwaste program. If the program were offered
       for free, it would eliminate the incentive for customers to backyard compost.
       Backyard composting is, of course, the most preferred method for dealing with
       compost both from the system cost point of view and to encourage customers
       to deal with their own waste to the extent possible. The $2 monthly fee is based
       on estimated cost-of-service spread  across a  year-long subscription.   The
       curb/alley pickup of yardwaste  is provided year-around, and charging yea/-
       around  kept  the  monthly cost down.   The City  established a limit of 5 units
       (bags, bundles, cans, etc.) of yardwaste per week.   This is  to discourage
       neighbors from banding together and to discourage landscapes from using the
       City's collection trucks to dump their yardwaste.

  o    Alternatively, customers may choose to dispose of their yardwaste by bringing
       it to the transfer station as part of the "Clean  Green* program.  Under  this
       program, customers bringing in carloads of yardwaste1* pay a reduced fee of $4
       per carload ($2 in 1967-1988). If customers have yardwork that would generate
       fewer than 6 trips to the transfer station  per year, this would be a  cheaper
       alternative than the curb/artey yardwaste program.  However,  customers also
       have to weigh  the convenience factors involved.   Customers bringing in
       yardwaste in trucks or vans wil pay $48 per ton, with a minimum charge of $10.
       There 'm a strong financial incentive for these customers to subscribe to the City's
       curb/a8ey program, unless the Kmit of 5 bags is too constraining.

Customer Options, but Convenience:

  o    Customers have the option of continuing with convenient carry-out (backyard)
    19 The yardwaste must be 'dean-, and cannot be mixed with other materials -
garbage, hazardous waste, etc.


       service.  However, this service costs 40% more than curb/alley pickup.

  o    The Curb/alley  recycling program  continues  to be  available,  with  the  fee
       embedded in the minimum  charge for ail customers.  Therefore, the program
       continues to  be available at no additional charge.  This continues the financial
       incentive to reduce waste (the more waste in the recycling bin, the less in paid
       garbage cans),  and provides a  very convenient program.   Our participation
       percentages  have shown the importance of the convenience factor.  Over twice
       as many eligible households as forecast have signed up for this program (60%).

  o    The City offers a new  bulky  item/white good  (appliance)  pickup service.
       Although this service is not cheap ($15 per item), it gives customers a convenient
       alternative  for disposing of  awkward wastes, after they have exhausted other
       alternatives such as bringing it to the transfer station (paying $5 per trip or $62
       per ton), or possible pickups by charitable organizations.

Customers select from the array of service choices to construct the service they need.
This helps them get some degree of control over their bill.  In fact the restructuring of
Seattle's system and the  new options allowing customers to choose the sen/ices they
need have  resulted in nearly  constant or lower bills for the  majority of  Seattle's

The new rate system  also assures thai   	           lence  the full effect of the
financial rewards  or punishments associated with tru   , -vice and behavioral choices.
Customers construct their service  out  of  the  following  choices: whether  they want
curb/alley or carry-out service; how many cans they need to subscribe to on a normal
basis;  whether they need yardwaste service or not or choose to bring it  to transfer
stations, compost etc.; whether they want to participate in the City's recyciing program
(no additional fee);  whether they need "trash tags*; and whether they want pickup of
bulky items.20

The City befieves this system provides an  integrated array of rates and  program
incentives to lead customers to reduce waste, either through buying carefully, recycling,
or reusing.   The City has set aggressive  waste reduction goals, and believes it has
designed a system that win allow us to meet these goals.
    a°The City also provides "specials', which are special one-time pickups of additional
waste via cans or dumpsters. These are available at volume-related additional charges


                                       RATE AND PROGRAM CHANGES

A comparison of tonnage over the entire period since the introduction of variable can
rates (1980-1989) shows that residential landfilled tonnage decreased 20%, pounds per
household feil 25%, and  pounds per capita declined about 20%.  However, across a
number of measures, the biggest impact was felt with the most recent rate  change
(January 1989), when the charge for extra cans was increased from $5 to $9, when the
mini-can was introduced, the curbside yardwaste program was introduced, and the
curbside recycling program was geared up.   The impacts on the system  and  on
customers are summarized below.

Effect on tonnage:

  o   Between 1986 and 1989, residential  tonnage fell 25% (190,600 tons in  1986 to
      143,000 tons for 1989).  The annual decreases in tonnage  were 1%, 5%, and
      21% between  1986 and 1989.  Residential tonnage in 1980 was 179,500 tons.

  o   Over the same period  (1986-1989),  the pounds per household fell from  1,685
      to 1 ,236, or a decline of 27% over  the period. Annual changes were decreases
      of 2%, 5%, and 21%.  Pounds of waste landfilled per capita also declined by 25%
      over the period, from 780 pounds  per year (2.1  pounds per  person per day) to
      587 pounds per year (1.6 pounds per person per day). The  declines dunng the
      betweervyears were  1%, 4%, and 20%. Residential pounds per household were
      about 1638 in 1980, and residential pounds per capita was about 728 in that
      same year.

 o   Although the residential tonnage sent to the landfill declined significantly between
      1968 and  1989. the total number of residential tons that  the  Utility  handled
      (combining landfilled waste and tonnage collected through the City's recycling
      and yardwaste programs) increased by 5.7%, or over 11,600 tons between the
      two years. However, growth  in both  population and the City's economy  are able
      to account for this difference

Effect on
 o   City-wide estimates of the tonnage of generated waste that was recycled were
      about 22% in 1985, 24% in 1986. 28% in 1988, and have  increased to about
      34%  in  1989 (1988 and  1989 figures include  the recycling  from the  City's
      curbstde programs).  These percentages include recycling by residential and
      commercial sectors.

 o   Sign-ups for City  sponsored residential recycling and diversion  programs in


      1988 and 1989 were very strong.  Participation in the city's curb/aJley recycling
      program was 63% in 1988, and 77% in 1989.  The average annual pounds per
      participating household was 740 in 1988 and 768 in 1989. A total of 23,900 tons
      of matenaJ was collected in  1988, and  over 40,700 tons were collected in  1989.
      The 1988 figure reflects that almost 12% of the residential tons that the  City's
      utility handled  were  recycled tons.  In  1989, over 62% cr ;ne City's customers
      signed up (and paid) for the City's curb/alley yardwaste program.  The total
      tonnage collected from this program was 33,800 in 1989.  In 1989, the curb/alley
      recycling and curb/alley yardwaste program diverted a significant portion  of the
      Utility's residential waste stream (about 19% and 15%, respectively).
Effect on Subscription levels:

  o   In  1981, over 80% of the Utility's customers were signed up for four or more
      cans of service.  By 1985, 47% of the Utility's single family  customers were
      subscribed to four of more cans of service. With the significant rate increases,
      the percentage of customers selecting this high service level decreased to 23%
      in  1986. less than 6% by th* end of 1987, about 3% in 1988, and just over 1%
      in  1989. These customers     ~  -  toward lower service levels.  Although only
      31 % of the customers were        oed to one can of service per week in 1985,
      this figure increased to almost 44%  in 1986, 56% in 1987, and to over 63% in
      both 1988 and 1989.  In 1989 an additional 22% subscribed to  the new lower
      "mini-can"  of service.

  o   The average number of cans  subscribed  per household was ? 5 in  1981 when
      the variable can system was introduced.  By 1985, this h*       decreased to
      about 2.6  cans per household.  However, during the perioc 3i rising rates, big
      declines were noted. By the  end of 1986, average cans subscribed had fallen
      to 2.0 per  household. At the end of  1987, subscriptions had declined to  1.5 per
      household, 1.4 by the end of  1988. and with the introduction of the new  smaller
      can, subscriptions had  fallen  to the  equivalent of about one 32-gallon can per
      household in 1989.

Effect on Bins:

  o   In  1981, the average customt  JHI was about $7.60.  At the  end of 1985, the
      average bill was just below $10 per month. By the end of 1986. the average
      bill increased to about $15.20. and by the end of 1987 had increased to about
      $16.35.  With subscription shifts, customers were able to  decrease their bills  to
      about $15.70 by the  end of 1988.  The new recycling and diversion programs
      introduced in  1989, along  with the new lower subscription level, allowed tne
      average customer to reduce the garbage portion of the bill to about  $'4 ao


      About 62% of the customers also paid an additional $2 per month to participate
      in the yardwaste  program.  There is no separate or additional charge for the
      City's recycling program.

The Utility would  like to be able to provide service  at a fair price, and  continue to
increase  waste  reduction  incentives.   Besides  the  array  of  changes  recently
implemented for the 1989/1990 rate period, the Utility expects to continue to enhance
the rates system over the  next 20 years.

  o   The Utility plans to conduct periodic comprehensive  rate studies.  The initial
      expectation is to conduct studies every two years, but the Council and the Utility
      will review  the financial integrity of  the Utility every  quarter to determine  if
      intermediate rate studies will be needed.

Items  to be explored or implemented within the 2-6 year time frame include:

  o   providing  more  flexibility  for  subscription levels for multi-family  customers.
      Currently they cannot subscribe to fewer than one can  per unit unless the entire
      building opts for the mini-can service.  This barrier is  related to current billing
      system restrictions,  but may be able  to be corrected in the longer run.

  o   developing methods of increasing recycling incentives for multi-family variable can
      customers.  Currently, solid waste bills art paid by landlords, and  presumably
      passed along to tenants via rents. However, the recycling incentives inherent in
      the variable can structure undoubtedly are diluted.  Possibilities include  offering
      a two-tiered rate  system for apartment buildings that participate  in recycling
      programs, and other options.

  o   providing smaller dumpsters than one yard collected once per week. There are
      currently few economical incentives we can provide those customers who do not
      need a ful one yarder.  Switching to cans is often more  expensive and  less
      convenient for many customers,

  o   increasing recycSng incentives by increasing  the variable  portion of the rates.
      There are several methods to accomplish this:
            move landfH  closure costs to another revenue collection method
            get mom non-rate funding sources.
            modify the operation of the solid waste  system to change the ma of  fixed
            and variable costs in the system.

  o   increasing equity between customer classes, including:
            finding an effective way to charge for compacted waste for variable can
            re-evaluate equity between multi-family  and single  family customers,
            between dumpster and variable can customers, and within the dumpster
            customer class.

  o   continuing to examine marginal cost pricing as an option for rate setting.

  o   continuing  to work  with  the  WUTC  and  the  private haulers to  influence
      appropriate rate setting in the commercial sector.

  o   The Utility prefers rate structures that are fee-for-service or cost-of-service based.
      That may involve evaluating the appropriateness charging customers for optional
      programs directly via fees vs. embedding costs in the  basic rates.  This may
      indude  having customers pay separate  fees for City-sponsored recycling and
      yardwaste  programs.   However, the  Utility will  need  to  be  constantly re-
      evaluating  costs  and  rate  design to  make  sure that rates don't go up
      unacceptably and try to avoid the situation in which customers end up paying
      more for using less service.

In the 7-20 year time  horizon, the Utility expects to consider implementing  some
additional rates-related items.

  o   In the longer run, as technology improves and after the expiration of the current
      collection contracts,  charging by weight would provide the fairest method of
      charging, when incorporated with a customer  charge (or  stopping  fee) and
      frequency component   This  would  take care of the problems  of smaller
      dumpsters, compacted  waste, paying for extras, and  the  increased  flexibility
      needs for  multi-family  customers.   In  addition,  it would  make it  fairer for
      customers. They would not have to pay for service they did not use


(SWU, 1988a)      Solid Waste Structural Rate Issues Paper. February, 1988 Seattle
                  Solid Waste Utility, Seattle,  Washington.

(SWU, 1988b)      1989-90 Solid Waste Rate Study.  May, 1988. Revisions acccted
                  October,  1988, Seattle  Solid  Waste  Utility,  Division  cf  S«arje
                  Engineering Department Seattle, Washington.

Skumatz, Lisa  A.   "Volume-Based Rates in  Solid Waste:    Seattle's
                  February 1989.


                                BAG/TAG SYSTEMS
 Tables 2.1 and 2.221 provide summaries of important characteristics of a number of
 jurisdictions with variable rates.  For a comparison of pros and cons of bag/tag vs.
 variable can rate systems, see Part II, section 2.3 of this document.
    21 The sourca for these tables ia "The Effacts of Weight- or Volume-Based Pnong
on Sotid Waste Management", Draft Report, January 1990, Research Triangle institute,
Research  Triangle Park, North Carolina, prepared tor U.S. EnwonmentaJ  Protection
Agency.  The authors grstsfuty acknowledge the RTJ and EPA for the use ot  tnese



Community (paewteUon)

Carlisle. PA (19.000)
Duhithe.C.A (10.000)
Grand Rapids. Ml (170.000)
High Bridge. NJ (4,000)

Holland. Ml (30.000)
IUo*,NY (9400)

Jefferson Cily. MO (36.000)
Laming. Ml (125.000)

LaTrobe. PA (12.000)
Newport. NY (2.000)
Mympia. WA (10.400)
Pcrkasic. PA (6400)
Plantation. FL (64.000)
Seattle. WA (500.000)

Wiles Bane. PA (50.000)

Woodstock. IL (12.000)

Dale •*• pricl** Mandatory
arniraai nrgnai

> 5 years ago
Early 70's

June 1. 19M

> 22 yean ago

-10 yean ago
Couple years ago
1954 or earlier
January I9U
15 16 years ago
1911 (revised fee



•r option*!







If optional,
not available

not available


60 70* (by
resident bldgs.)








*-• — —







Ara|li2 units






< ollrc-





















l->e\ and







• M means city employees collecl waste N/M means city conuacis private hauler N means residents contract private
•• N means disposal at a site or facility that is private or owned and operated by another local govemmeni entity, e g . a
county land/ill.

Cast 1 19im CoHcrlhiA
c 	 »

thaml Rapid), Ml

High Bridge. Nl

Holland. Ml


Newport. NY



PtamaiKW. FL

Wifte««arrc. PA
Woodstock. IL
Program bap

Program beg*
Frogrem oags.
begs or cant
Program bag*.
program cam
Program bag*

Program bags
Program bag*
Program bags
Program begs

Own cam; bag*
Program bag*

Program bap
Wheeled lofcrs

Program bap
Program bag*









Mmtmum Per ConlaUcr Times/week
$I.IO/30gal. 1
$060/13 gal.
lanaie* $130/20 bag* 1
l.lmilliai $043/bag 1
$33/qlrgct*32 $1.63 each 1
Mkkai/yeer additional clicker
$130 /bag or 1
$1 10 /mo. /can
$1.30/30 gal 1
$1.20/16 gal
$IJO/bag 2
$730/10 bags 1
$3l/«moe. $0.2J/bag 1
$1.30/32 gal 1
$1.10/21 gal
$0.10/20 gal
Ye* Variety of at rv ices 1

SO SO/20 Ib. 1
$1.30/40 Ib.
$16/20 bag* 2
Alkatl $10.70 $13.73/30 gal can 1
lor mini -can $9.00 / ca. edd'l ccn
$930/l.3agalbagt 1
$3.33/1. 16 gal bap
$122 /bag 1
— — ^••••••^^ i 	 i * 	
Cwbtkle or l^rwinil,
Backdoor Incinerator.
Transfer Station

* •
















•••i ._-_L_(. -LB__ •— g
Dale Available









1 ' " '

Cailisle. PA
Grand Rapid*. Ml
High Bridge. NJ

Ilion. NY

Jefferson City. MO
laming. Ml
Newport. NY
OtyT.ipia.WA .
Petkasie. PA
Plantation. FL
Seattle. WA
Wilkcs Dane. PA

W,..lsnuk. II.
M - MlM.I |I.I|HI
- Ilitli nude tuiici
No program

V before 6/19


I1 -


Civic Groups
Civic Group*
Private, city
contt acted

I <>i(U(*lcd Caidb
1 rnoiu ( nil
provide reusable
Clear bag
Clear bag
Recycle can
furnished by city
Bucket provided
by city
Cart* provided
by contractors
Bucket provHlud
by ciiy

Additional Co-4 lo


1 incl. w/ 6 regular
bags;ea. add'150*

•• II =
A =
S =
Drop off or



G.I I.C. A




Program Start In
Relation lo Unit
Voluntary - B
Mandatory - S

Voluntary - B

Voluntary B
Mandatory S
Voluntary - I)

Ho* Often


l/wk (Noiihcnd)
l/uio (Southcnd)

Not ijnilicilile

Yardwastc Recycled
Cailisk. PA
Ound Rapids. Ml
Jefferson Oly. MO
LaMMg. Ml
LiTmbe. PA
Newport. NY
Otympia. XV A
Pcifcuk. PA
Seattle. WA
WUkcs Bute. PA
Woodstock. IL
No ptojrini
No proj»«i
V (leaves)
Drop -off or




Program Start !•
Relation lo Unit




Composting or

Composting and


Composting mtd

Compo siing
Compelling and
How Often
As needed



As needed

As needed
At least I/mo.
As needed



Yes dear bags

Additional Cost
lo Residents





                                  OF OTHER JURISDICTIONS
Minneapolis. Minn. (Pop.360,000)

Boulder County. Colo. (Pop. 220,000)

Tacoma. Wa. (Pop. 165,000)

St. Louis Park. Minn.  (Pop. 45,000)

Palo Alto.  Ca.fPoo. 57,000)

Summit. N.J. (Pop. 21,000)

San  Jose. Ca. (Pop. 738.000)

Carlisle. Pa. (Pop. 19,000)

Hemostead. N.Y. (Pop. 800,000)

Santa Monica. Ca. (Pop. 97,100)

Ann  Arbor. Mi. (Pop.  110,000)

Philadelphia. Pa. (Poo. 1,700,000)

Austin. Texas. (Pop. 450,000)

Tamoa. R«. (Pop. 278,000)

PlainfiekJ.  N.J. (Pop. 45,000)

 Minneapolis. Minn. (Pop.360,000)

       Mrmaapofis charges a flat fee for unlimited collection and offers a credit to
 residents participating in a afleyside recycling program. A Minnesota state  law has
 required that no "unprocessed" (-unbumed) waste be placed in landfills after
 January 1, 1990. The city participates in a Hennepin County program which offers
 financial rewards to cities which reach certain recycling goals. Rates do not cover
 the cost of operation, and the solid waste section of the Department of Public Works
 receives money from the city's general fund.

       Coiection and Rates. Minneapolis provides municipal garbage collection to
 residential customers, while commercial hauling is performed  by private haulers. All
 residential customers are charged  $l2/month for weekly  collection of unlimited
 garbage. Backyard service is not available. Customers who have demonstrated a
 "good faith effort" to participate in curbside recycling are charged $7/month. No
 discount is available for low income, elderly  or handicapped people, but the
 recycling credit is granted very easily to people in those  groups.

       Recycling. Source-separated recydables are collected alleyside every two
 weeks by city recycling crews. Recycling and waste are collected on the same day.
 The crews are equipped with small computers, with which they keep a record of
 which customers are recycling a reasonable portion of their waste. The benefit of the
 doubt goes to the customer. Customers who recycle  reasonably on three  of the six
 recycling opportunities each three  month billing period are  entitled to the $5/month
 recycling credit
       Minneapolis has a recycling participation rate of 60-70%, which is high enough
to qualify for 80% support by  Hennepin County for the cost of their recycling
program. Last year about 10,000 tons of Minneapolis's 160,000 ton residential
wastestream was recycled. This year* projected total is 15,000 tons.
              Minnesota projects that the state will run out of landfill space in 5
years at the currant pact, and has enacted the law against landfilling "unprocessed
waste" as a result Currant tipping fees are S50/ton at the landfill Minneapolis uses.
In the next several months a mass-to-energy plant will be completed by Hennepin
County. Tipping few at the new plant will be $75Aon.

 Boulder County. Colo.  (Pop. 220,000)

      In Boulder County, private haulers offer residents semMimrted pickup for a
fixed fee. The county is located along the front range of the Denver metro-area. The
county has been active in recycling since 1976 by providing a subsidy to a local
non-profit recycling firm known as  Eco-Cyde. The County Commissioners enacted a
resolution in 1981 that  mandated the operator of the local Marshall Landfill, which is
running out of space, to charge a  fee at the landfill to those who disposed at that
site. This fee has generated over $500,000 for the Resource Recovery and Recycling
Fund  since 1981. The Fund has been used to encourage recycling activities in the
County. Refuse is collected by private haulers, and landfill space is inexpensive and

      Coflection and Rates. Private haulers compete by  price for refuse  collection
business. Rates are about $8/month for two cubic yards, or about 2 1/2 30 gallon
cans per week. Private haulers do  their  own billing, and  extra trash is  charged by
the trash hauler on an  individual basis. Collection is not mandatory,  and city or
county rate assistance  is not available to low-income, elderly or handicapped people.

      Recycfing. Money from the Resource Recovery and Recycling Fund is used to
fund a number of solid waste programs, including curtoside recycling for the City of
Boulder.  60 percent of the City's 22,000 households participate in the program.
Solid Waste Manager Debbie Fife estimates that 10-12% of  Boulder's waste stream
is recycled. This year recycling and garbage are being collected on the  same day
for the first time, and diversion and participator*  impacts of that change  are not yet

      LandflL Boulder  County is within  easy hauling distance of three landfills: two
in Weld County with approximately 27 years of operating life remaining and one in
Jefferson County with a projected  lifespan of 30 years. Tipping fees are $l2.00/ton.

 Tacoma. Wa. (Pop. 165,000)

       Tacoma provides variable can rates without curteide recycfing. The city is
 running out of landfill space, and is in the process of completing an  RDF system to
 extend the life of its landfill. Tacoma's dropbox and buyback recycling system is very
 effective. General fund revenues are not used to finance Tacoma's Solid Waste

       CoJoction and  Rates. Tacoma provides municipal refuse collection, charging a
 monthly rate of $6.40 for the first can of service, $2.95 for each additional can. A
 city-provided 60 gallon container, which is compatible with the city's automated
 collection system, is  billed as one can, and a 90 gaJJon container is two cans. One
 can of service is  mandatory, and backyard service is available for a fee that varies
 with the distance from the street to the cans. Backyard service is free for people
 who are  unable to bring their cans  to the curb, but no low income, elderty or
 handicapped discount is available off the curbside rate. Crews note extra cans on
 route sheets, and $2/can for each extra is charged.
       Bills are  included in a bi-monthly utility bill,  and services are  entirely rate

       Recydng.  Approximately 26% of Tacoma's waste stream is currentiy recycled
 through dropbox and buyback programs and recycling at the landfill. Under the
 buyback system, private recyders purchase waste paper, scrap metais, bottles  and
 cans, used oil,  batteries and some  plastics at buyback centers. The city contributes
 to recycling education and the establishment of school recycling programs. Private
 recyders have been  struggling because of the drop in market prices for secondary
 products, especially newspaper.
              Tacoma's landfifl is projected to run out of space within three years at
currem jumping levels. The city hopes to extend the iandfiB's fife to 20 years by
processing ail wast* at an RDF plant and a proposed  pyrotysis plant The RDF
facility is complete, but the energy generating plant where the RDF win be burned
along with coal and wood waste is still undergoing environmental review. A
proposed pyrolysis plant is also currentiy involved in the BS process.

 St. Louis Park. Minn. (Pop. 45,000)

      St Louis Park charges residents a fixed fee for unfmfted pickup with a
discount on their utility bin for participating in curbside recycling. The city is a suburb
of Minneapolis that experienced rapid growth soon after World War II. "Refuse" is
defined as  an enterprise fund in the city budget, and waste programs are funded
through rates and through a Hennepin County grant program. The crty council has
final authority over St Louis Park's rates.

      Coflection and rates. St Louis Park contracts with a private collection
company for weekly curbside collection of residential waste. The contract requires
the city to pay the hauler an agreed fee per cubic yard of waste collected. The crty,
on the other hand, charges its customers $47/three months for collection of
unlimited waste, less $6.60 for customers who satisfy recycling requirements.
Garbage service is mandatory, and payment assistance is available through the
city's general assistance program for those who qualify. Weekly collection of
yardwaste is available for $9.24/year, and customers who do not separate yardwaste
from garbage are charged an extra $3/month. The city will be renegotiating its
collection contract in 1991,  and is considering instituting a new rate structure  at that

      Recydng. St Louis Park pays its contractor $1.95/month for each household
(single family through four-ptex) from which it collects recycling. The city provides
three interlocking plastic containers for the collection of newspapers, cans and
bottles.  70-80% of the city's residents qualify for the recycling credit by recycling at
least once a month, a participation level that qualifies St Louts  Park for Hennepin
County's maximum recycling subsidy of 80% of the cost of the program.
Participation is noted by the contract collector, who uses a computer to read bar
code information on a sticker on residents' recycling containers. Customers can also
qualify for the credit by presenting a receipt from a private recyder. In 1988.  St
Louis Park recycled 26% of its waste stream, 40% if yardwastes are included
              Tipping fees rise July 1, 1989 from S20/ton to $75Aon. The adcec
cost will help finance the planning and construction of the county's new incinerator
as well as recycling programs in Hennepin County suburbs. Unprocessed waste
cannot be placed in Hennepin County landfills after January 1, 1990.

 Palo Atto. Ca.fPoo. 57,000)

       Palo Alto has variable can rates and a curbside recycling program. The city-
owned landfill is running out of room, and tipping fees will increase the city's costs
as an increasing percentage of its waste  is longhauled. Rates will increase
significantly over the next four years. Waste programs, including  refuse collection,
recycling, street sweeping, landfill operations and  refuse capital projects, are funded
entirely from  refuse collection fees.  The city council has final authority over rate

       Coflection and Rates. Palo Atto contracts with a private hauler to provide
backyard garbage collection and curbside recycling. The city guarantees a
percentage or rate of return on the collector's fixed assets, and will pay the
contractor the difference between the agreed rate of return and the company's other
profits, which are generated through extra services to clients and revenue from the
sale of recycled resources.
       Monthly rates are $9.25 for one can backyard service and $12.10 for two
cans backyard service, an increase of 36% over the pre-Jury 1 cost. A  minimum  one
can service level is mandatory, and no discount for low income,  elderly or
handicapped people is available. Rate increases of 15-20%/year are planned for  the
next four fiscal years. A minimum of one can of service is required, and cans m
excess of subscription levels are not collected.

      Recydng. Palo AJto has had a curbside recycling program since 1978.
Materials collected indude glass, aluminum cans,  newspaper, bi-metaJ cans,
cardboard, small scrap metal, and waste  oil. Reusable burlap bags are provided for
curbside recycling collection, and approximately 70% of Palo Alto's households
participate in the program. 14% of the city's  waste stream is diverted through
curbside recycling, drop-off recycling and a composting program at the landfill.

      Landfll Palo Alto operates its own landfill, and therefore does not pay a
tipping fee. The landfill is estimated to have 11  years of space left in it and  as a
result the city is preparing to longhaul its refuse, a process it predicts will cost m tne
neighborhood of $35/too. Increased waste rates are intended to offset  the cos: of
increased hauling and disposal costs.

 Summit.  N.J. (Pop. 21,000)

      The Summit Department of Community Services oversees curbside collection
 of waste and recycling, and is supported out of general fund revenues. Summrt is
 located in Union County,  in northern New Jersey. Recycling  is required by state law,
 and Summit runs a recycling dropoff station and contracts with the county to collect
 curbside recycling. The Summit  Common Council has final authority over rates
 charged  in Summit. The rate is based on the operating budget as established by
 the Director of Community Services.

      Colection and Rates. The City of Summit provides weekly unlimited backyard
 collection of waste, which is financed entirely through tax revenues. Customers are
 forbidden by state law to include recyclable paper, glass, cans or bottles, or
 yardwaste in their garbage. Garbage collectors listen for the sound of glass or
 aluminum mixed in with garbage, and collect only recydable-free waste.  Municipal
 service is also available to small businesses.
      The reduction of solid waste that has resulted from the recycling program has
 allowed the  city to reduce the frequency of garbage collection from twice per week
 to once per week. The reduction in manpower  and equipment has resulted in cost
 savings to residents.

      Recycfing. Summrt operates a dropoff center and contracts with Union  County
 for curbside recycling. Approximately 25-30% of Summit's waste stream  is recycled.
 The dropoff center has been in  operation since the early 1970's. It accepts paper,
 glass, aluminum, other metals, oil, corrugated cardboard, yardwaste,  and plastic
 bottles and jugs. The center is open six days a week,  and Recycling Coordinator
 Bob Lee describes it as "a real  social happening" on Saturdays.
      Summit pays Union County $20 per household per year for bi-weekly pickup
 of curbside  recycling. The county owns "Eager Beaver" recycling trucks  and hires
 crews to collect ore-sorted recyclable goods and perform color sorting of bottles.
 Bundled  newspaper is the only  wastepaper collected at the  curb. The county does
 not provide  recycling containers. The county pays a scrapyard a fee to  process and
 sell the recydabJes, and the scrapyard  and the county split  the gross revenues from
 the sales 50-50. The county is constructing a composting facility for yardwaste,
 where yardwaste collected by municipalities and others can  be disposed of for a fee
 which has not yet been determined. 44% of the county's population  is served by the
 curbside recycling collection program,  and the county  estimates that 17% of the
 county's  waste stream is recycled.

      LandffiL Summit's disposed waste is longhauled to Pennsylvania at a cost to
Summit of $103Aon, including transit and tipping fees. The tipping fees  have been
stable for the last two years.

 San Jose. Ca. (Pop. 738,000)

       San Jose offers unlimited garbage pickup for a flat fee and free curbside
 recycling. San Jose does not face a landfill crisis. The Office of Environmental
 Management operates San Jose's solid waste system, and general fund money is
 used for solid waste programs.

       Collection and Rates. San Jose's customers pay $6.61 monthly to a private
 contractor for unlimited weekly curbside waste collection. A fraction of the waste fee
 is paid to the city by the contractor as a franchise fee. A discount is available for
 low income, elderly or  handicapped people.

       Recycfing. San Jose contracts with Recycle America (Seattle's north side
 contractor, owned by Waste Management, Inc.) for weekly curbside collection of
 source separated glass and bottles, newspaper, and mixed wastepaper. The city
 pays Recycle America  a fee of $300,000 per quarter for recycling collection at
 177,000 households and guarantees R.A.  $300,000 in revenues from selling
 secondary products. San  Jose makes up the difference if actual revenues are less
 than $300,000, and revenues in excess of $300,000 are  split evenly between the city
 and  the contractor.
       San Jose's Office of Environmental Management estimates that 8%  of the
 city's waste stream is diverted through curbside recycling. The cost to the city of
 recycling service depends on the strength of the recycling markets.  The city's cost
 reached a low of $10Aon  in the early 1980's, but is now $70-80/ton.

       Landfffl. San Jose's waste is delivered to a privately owned landfill. Tipping
fees  of 312/ton are covered by the city. The landfill has  an estimated 50-70 years of
life left.

Carlisle. Pa. (Pop. 19,000)

      Carfisle contracts with a local hatder to collect pre-pakj bags of garbage.
Customers can purchase the bags from the city, or can contract with a private

      Collection and Rates. The town sells 32 gallons bags for $1.10 and 16 gallon
bags for $.60. A local garbage hauler makes weekly collection of bags placed by
the curb, and the town pays the contractor $.80 for each large bag sold and $.40
for each small bag sold. Service is optional, and no discount is available for low
income, elderly of handicapped people.
      Kuhn Sanitation, a company which competes for residential  garbage collection
business in Carlisle, charges $l2.50/month for up to six bags of waste collected
weekly,  $l4/month for weekly collection of a 90 gallon container. Kuhn customers'
extra bags are billed at $.50 each. Monthly fees charged by other private collectors
in  Carlisle fall in the $8-10/month range.

      Landfl. Waste is hauled to a landfills  in Scotland, Pa., and Neuberg, Pa.,
where tipping fees are the responsibility of the private haulers.

 homestead. N.Y. (Pop. 800,000)

       The Hempstead Department of Sanitation, which provides curbside waste and
 racycing coixtion. is financed out of general fund revenues. Hempstead is a
 Township," a political entity consisting of several towns and  villages. Hempstead has
 instituted mandatory recycling under New York State's "enabling legislation," which
 allows local jurisdictions to require recycling.

       Coioction and Rates. The town of Hempstead provides unlimited municipal
 weekly curbside refuse collection for residential customers. No direct fee is charged
 for garbage service. Other* villages and sanitation districts within the township
 provide their own waste collection. Commercial waste is collected through private
 contracts. All waste generated in Hempstead Township must be delivered to the new
 waste-to-energy facility in Hempstead.

       Recycling. All villages and sanitation districts within Hempstead Township are
 required to provide curbside  recycling to their residents. They can operate their own
 recycling programs or participate in Hempstead's program, which has been in
 operation  for one year.
       Hempstead delivers  source separated paper, mixed cans and glass, and  dear
 glass to a  vendor, who either charges or credits the township for each delivery,
 depending on the state of  markets for recyclable goods. Commissioner of Sanitation
 William Magraine estimates an 85%  participation  rate and 13% of the waste  stream
 diverted to recycling.

       LandflL A private contractor has just completed a waste-to-energy facility  with
 a capacity of 2300 tons per day in Hempstead. Tipping fees are $33.70/ton ($2428
 to Hempstead as a result of a financial arrangement with the contractor).  All waste
 generated within the township must go to the facifity, and the township guarantees
 an agreed rate for energy generated at the facility. Electricity and scrap metal
 revenues beyond an agreed  level are divided between the township and the
 operators of the plant
       The ash  residue generated by the plant is the responsibility of the  hauler who
brings It to the  plant The weight of the ash is typically 28%  of the  weight of the
unprocessed waste. Ash is longhauted to upstate New York at a cost of
approximately $130Aon, which results in an effective tipping fee at the waste-to-
energy plant of $60Aon for the township and $68Aon for other customers.

 Santa Monica. Ca. (Pop. 97,100)

      Santa Monica provides flat fee municipal waste coOection and offers curbside
 and dropbox recycling programs. Waste collection programs are funded entirety by
 revenues from rates and sale of secondary goods. Rec -':ng programs are
 complicated by the fact that 83% of Santa Monica resice    ive in multi-family
 dwellings. Santa Monica is considering implementing a var.aDie can rate structure
 and a yardwaste composting program.

      Cofection and rates. Santa Monica provides unlimited weekly waste collection,
 street cleaning and recycling programs for a fee of $29.26 per two  month billing
 period. Service is available to residences and some businesses. The proceeds of a
 recent rate increase will be used to cover increased collection and disposal
 costs(induding changes necessary for an automated collection  system),  and to
 increase  recycling  activities, including a study of a possible yardwaste composting

      Recycling. The city provides  bi-weekly curbside collection of source-separated
 recydables to single family  and low occupancy multi-family dwellings in Santa
 Monica. Two five gallon recycling containers are provided, free, to each household.
 Materials collected are  newspaper,  mixed glass, bi-metal and aluminum cans, PET
 plastic and used motor oil.
      "Recycling zones" (groups of dumpsters for cans and plastic, glass and
 paper)  are available in  alleys near most apartment complexes. A privately operated
 drop-off and buyback recycling center collects the same materials as the curbside
 program  as well as high grade scrap metals, high grade  paper, : istic, phone
 books, magazines, Kraft paper and corrugated cardboard.
      The city sells secondary goods to private recyders, who also operate
 independent buyback centers. Santa Monica Recycle «stimates that 2.5% of the
 city's waste stream is recycled through ^ «tr<         ion and recycling zone drop-
 offs, with an additional 3.5% diverted ar              writer. An unknown additional
 amount is recycled through traditional industrial re-use.
              Santa Monica pays $9/ton transport fees and $10.58/ton tipping fees
to dispose of waste in a privately owned landfill. The landfill is permitted through
1991, and the landfill operator is in the process of seeking an expansion permit.

 Ann Arbor. Mi. (Pop.  110,000)

       Tax revenues cover the cost of the activities of Arm Arbor's Sofid Wa
 Department A landfill crisis and proposed mandatory recycling ordinance have
 raised the refuse-awareness of Ann Arbor's  citizens and helped raise support for a
 voluntary  recyaing program. Ann Arbor is considering several rate options, including
 a combination of tax revenue funding and rate funding.

       Collection and  rates. Ann Arbor provides unlimited municipal weekly curbside
 collection of residential waste. There is no fee to the users of waste services.

       Recycfing. Ann Arbor contracts with a non-profit organization, Recycle Ann
 Arbor, for monthly curbside collection of recydables. Customers must provide their
 own recycling containers. Goods to be recycled must be separated  into several
 categories: newspaper; aluminum cans  (flattened); tin cans (labels removed,
 flattened); dear, green and brown glass; used motor oil; cardboard; and car
 batteries.  The city does not provide recycling containers. Approximately 35% of Ann
 Arbor's households participate  monthly, and about 12% of the residential waste
 stream is  diverted. Diversion grew by 36% between 1988 and 1989.
       The city pays Recycle Ann Arbor $390,000/year for its services, and also
 provides land for processing and trucks for  $1/year. The city estimates that it
 currently pays $80/ton for its recycling program.
       Fall leaf collection in Ann Arbor yields 25,000 cubic yards of material each

       Landfl. The city's landfill is estimated to have 21 months worth of space left,
 but is  applying to expand the landfill to a 20 year capacity. Ann Arbor does not pay
tipping fees at its own landfill, but charges an inflated $14/cubic yard (about $56Aon)
for private landfill use. V the application for expansion is rejected, the city's most
likely course would be to haul its waste to a privately owned landfill, where tipping
fees are $27/toa The total cost of the city's current residential collection and
disposal of refuse is estimated at $iOO/ton.

 Philadelphia. Pa. (Poo. 1,700,000)

      Philadelphia's waste and recycling collection programs are financed entirely
out of tax revenues. Pennsylvania law (ACT 101) requires source separation in each
municipality of at  least three of the following materials:
clear  glass, green glass, brown glass, cans, newspapers, and HTPE and PET
plastic. ACT 101 also  prohibits municipalities from taking loads of leaves to landfills
for burial.
      Philadelphia's recycling ordinance, Bill 1251 A, requires separation of
newspapers, plastic containers, glass bottles and jars, bi-metal cans, yard waste and
garbage (food waste), and such other items as may from time to time be mandated
by regulation. Curbside  recycling has been instituted in part of Philadelphia   jt has
not been cost effective because of high labor and equipment costs.

      CoBoction and rates. The Philadelphia Streets Department £     
collection has been discussed, but seems unlikely in the current political climate.

      LandflL The city has a six year disposal contract with Waste Management
Inc.. owners of a landfill in nearby Bucks County. The City pays S55/ton (rises with
inflation)  to dispose of waste at the landfill or at  one of Waste's transfer stations. The
City must also pay a $2Aon surcharge to the state for all solid  waste disposed in a
landfill. This money goes into a fund to promote recycling programs throughout the
state through grants.

Austin. Texas. (Pop. 450,000)

      Austin provides flat fee financed collection of both recydabtes and waste, and
does not face a landfill crisis. Austin's Solid Waste Services is an enterprise fund,
and  does not receive financial support from the city's general fund. The city council
has final  authority over Austin's rates.

      Collection. The city collects unlimited wastes curbside twice per week at
structures containing three or less households. Customers are billed $8/month, and
service is mandatory. Commercial and multi-family residential collection is  performed
by private contractors.  An automated collection system serves about 6000 of
Austin's 112,000 households.

      Recycling. The city provides weekly  curbside collection  of source-separated
recycling consisting of  glass, metal, newspapers and corrugated cardboard.
Recyciables are sold to a local processor at prices determined through a bid
process.  Austin does not provide recycling containers. An estimated 4% of Austin's
residential waste stream  is currently diverted through crty collection of recyclables,
and  an unknown amount is diverted at dropoff and buyback centers.

      Landfifl. Austin owns its own landfill, which  currently  is estimated to have 3-12
years of life left. City trucks pay no tipping fee. Austin does not anticipate difficult/ in
siting a new landfill in the future.

Tamoa. Fla. (Pop. 278,000)

      Tampa provides unlimited oofloction of waste for a flat fee, and is in the
process of implementing a recycling program. The Solid Waste Department does not
receive money from the general fund.

      Coflectton and rates. 60% of Tampa is serviced by municipal collection crews,
and 40% is served by crews under contract to the city. All residences pay $13.90 for
twice weekly unlimited collection, and service is mandatory.

      Recycfing. 4082 homes currently receive weekly curbside collection of
recydabies under a pilot recycling project. Goods are sold to a contractor, who has
a greed to pay $40/ton for newspaper and glass and $1200 for aluminum. The
contractor who collects curbside recycling receives 30% of the revenue from the sale
of recycled goods and $1.90/month for each household serviced. The city provides
recycling containers.

      LandfflL The city operates a refuse-to-energy plant which charges a tipping fee
of $65/ton. Ash and non-burnable refuse are hauled to the county landfill, which has
a tipping fee of $26.30/ton. Landfill capacity  is estimated at 11 years.

Plainfieid. N.J. (Pop. 45.000)

      Private companies regulated by the New Jersey Board of Pubfic Utilities
provide unlimited garbage collection for Plainfieid's residents, and the city makes use
of Union County's recycling system. Solid waste programs are run by the Public
Works and Urban Development department, and are financed by trie general fund.

      Collection and Rates. Private contractors regulated  by the state compete for
Plainfield's residential collection business. Fees for twice weekly backyard collection
of up to two cans of waste average $36/month, although  charges vary with «vel of
      Closure of landfills around New Jersey in 1988 resulted in high tipping fees,
and contractors passed higher costs on to their customers. High levels  of illegal
dumping that resulted from contract cancellations were a  problem soon after the rate
increase, but understanding of the landfill crisis and a decision by the city to enforce
its mandatory garbage collection ordinance have helped control  illegal dumping
      Plainfield is considering a contract collection, variable can rate system, which
would allow residents to reduce their  garbage bills by reducing their output of waste.

      Recycling. Plainfield pays Union County $20 per household per year for bi-
weekly pickup of curbside recycling. The county owns "Eager Beaver" recycling
trucks and hires crews to collect pre-sorted recyclable goods and perform color
sorting of bottles.  Bundled newspaper is the only wastepaper collected  at the curb.
The county does not provide recycling containers. The county pays a scrapyard a
fee to process and sell the recydables,  and the scrapyard and the county split the
gross revenues from the sales 50*50.  The county also operates  a composting facility
for yardwaste. 44% of the county's population is served by the curbside collection
program, and the county estimates that 17% of the county's waste stream is
              With the closure of New Jersey landfills in earty 1988, tipping fees
rose from $56Aon to $137/ton for northern New Jersey waste haulers. Currently,
Plainfield's private haulers deliver refuse to Union County's transfer station, where
they pay $132.60/ton for tonghaul to Pennsylvania and Ohio and tipping fees. A
mass bum facility that  would charge $90/ton is planned in a nearby area.

                          PART VI:  REFERENCES


1.0 Bibliography	VI. 2
1.1  Books and Manuals	VI. 2
1.2 Seattle Solid Waste Utility Documents	VI. 4
1.3 Other Documents	VI. 5
1.4 Periodicals	VI. 6
1.5 Acknowledgements	VI. 8
2.0 Appendix A: Worksheets and Computer Aids
                 to Solid Waste Decision Making	VI. 10
3.0 Appendix B: EPA Recommended Minimum Content
                 Standards for Paper Products	VI. 11
4.0 Appendix C: Order Forms	VI.  12

                  1.1  B1BUOGRAPHY: BOOKS AND MANUALS
American Public Works Association. Solid Waste Collection and Disposal: 1987.

Bingham, Richard D. The Adoption of Innovation  bv Local Government.   Lexington,
      Mass.: Lexington Books, 1976.

Bell, Ruth, Kjm Finch, and Pete Qrogan. Trends in State Recycling Le9islation. Seattle,
      Wa.: R.W.  Beck and Associates, 1989.

Caraley, Demetrios. Crtv Governments and Urban Problems. Englewood Cliffs, N.J.:
      Prentice Hall, Inc., 1977.

Columbia University, Public Technology, Inc.,  and the International City Management
      Association. Evaluating Residential Refuse Collection Costs: A workbook for Local
      Government. Washington, D.C.: Public Technology,  1978.

Glass Packaging Institute. Comprehensive Curbside Recycling: Collection Costs and
      How to Control Them.  Washington, D.C.: The Glass  Packaging Institute, 1988.

Hershkowta. Allen, and Eugene Salemi. Garbage Management in Japan: Leading the
      Wav. New York, N.Y.: INFORM, 1987.

Kemper, Peter, and John M. Quigley. The Economics of Refuse Collection.  Cambndge,
      Mass.: Baliinger Publishing Company, 1976.

Moore, Barbara H., editor. The Entrepreneur in Local Government  Washington, D.C.:
      International City Management Association, 1963.

National League  of Cities,  "Local Officials Guide* series.   Municipal Incinerators:  5Q
      Questions  Every  Local Government Should Ask. By R.W. Beck and Associates,
      Engineers, and Spiegel and  McDiarmid, Attorneys. Washington D.C.:  National
      League of Cities. December 1988.

Rimberg, David.  Municipal  Solid Waste Management Park Ridge, N.J.: Noyes Data
      Corporation,  1975.

Ruston,  John. Coming Full Circle: Successful  Recycling  Today.   New York, N.Y.:
      Environmental Defense Fund, Inc., 1988.
                                   VI. 2

Savas, E.S. et ai. The Organization and Efficiency of Solid Waste Collection. Lexington,
      Mass.: Lexington Books, 1977.

Stedman,  Murray S., Jr. Urban Politics. Cambridge, Mass.: Winthrop Publishers, Inc.,

U.S. Environmental Protection Agency. The Solid Waste Dilemma: An Agenda for Action.
      February,  1989.

Zajac,  Edward  E. Fairness  or  Efficiency: An Introduction to Public Utility Pricing.
      Cambridge, Mass.: Ballinger Publishing Company, 1978.
                                     VI. 3

Brown and Caldwell Consulting Engineers, "Residential Billing and Customer Support
      Services Study," for Seattle Solid Waste Utility.  October 9, 1987.

Customer Service Level  Survey.  October 1987,  by Jack Palmer, Seattle Solid Waste
      Utility, Seattle, Washington.

"Cutting Down on Garbage" factsheet produced  by the Washington  Energy Extension
      Service for the Seattle Engineering Department's Solid Waste Utility.

Final  Environmental Impact  Statement: Waste  Reduction.  Recycling  and  Disposal
      Alternatives. July 1988, Seattle Solid Waste Utility, Seattle, Washington.

1989-90 Solid  Waste Rate Study. May  1988, Revisions adopted October 1988. Seattle
      Solid  Waste  Utility,  Division of  Seattle  Engineering  Department  Seattle,

On the Road  to Recovery: Seattle's Integrated  Solid Waste Management  Plan. Draft
      Mayor's Recommendation, March 1989,  Seattle Solid Waste Utility,  Seattle,

Quarterly  Report. September, 1989, by  Lisa Skumatz,  Jennifer  Bagby,  and Diane
      Caviezel, Seattle Solid Waste  Utility, Seattle, Washington.

Residential Solid Waste Collection: Six Month Contract Evaluation. August 1989, by Ed
      Steyh and Lisa  Skumatz. Seattle Solid Waste Utility, Seattle, Washington.

Solid Waste  Structural Rate issues Paper. February. 1988, Seattle Solid Waste Utility,
      Seattle,  Washington.

      Seattle Sofid Waste Utility, Seattle. Washington.
                                    VI. 4

                   13  BIBLIOGRAPHY: OTHER DOCUML
Conn,  W. David, Economic Approaches to Solid  Waste  K ^naoement:  European
      Experience. Proceedings of Symposium on Economic Approaches to Solid Waste
      Management,  EPA 600/9-80-001, May  1980.

Efaw, Fritz and  William N.  Lanen,  Impact of User  Charges  on Management of
      Household Solid  Waste. Mahtech, Inc., Princeton, NJ, Municipal Environmental
      Research Library, Environmental Protection Agency, EPA-600/5-79-008. Cincinnati,
      OH, August 1977.

Jenkins, Robin R.. Municipal Demand for Solid Waste Disposal Se^       ""e Impact
      of  User Fees.  Ph.D. Dissertation, Draft. December 1989, University of Maryland,
      College Park,  Maryland.

Research Triangle Institute, "The  Effects of Weight- or Volume-Based Pricing on Solid
      Waste Management", Draft Report,  January 1990, Research Triangle Institute,
      Research  Triangle  Park,  North Carolina,  prepared for  U.S.  Environmental
      Protection  Agency.

Skumatz, Lisa A., Ph.D., "Economic Issues in the Solid Waste Field:  Comparisons  with
      the Case of Electricity", presented at the Western Economics Association Meeting,

Skumatz, Lisa A.,  Ph.D.,  "Empirical Analyses of Solid Waste Customer Subsr-otions and
      Choices", presented at the Western Economics Association M -       1990.

                       1.4  BIBLIOGRAPHY: PERIODICALS
Glenn, Jim. "Enforcing Mandatory Recycling Ordinances," in BioCvde. Vol. 30, No, 3
      March  1989, p. 31.

Glenn, Jim. "Recycling Economics Benefit-Cost Analysis," in BioCvcle. Vol. 29. No. 9,
      October 1968, p. 44.

Golob, Brian  R. "Integrated Waste Management  Planning:  the Minnesota Approach,"
      in Resource Recvdino.. Vol. VIII, Number 2, May/June 1989, p. 38.

Hageman, Kris. "How to Make a Good Recycling Program Better," in BioCycle, Vol.
      30, NO. 4, April 1989, p. 62.

Hahn, Jeffrey L "Managing Ash-Closing in on Policy Decisions," in Solid Waste and
      Power. August 1989, p. 12.

Katz, Marvin G. "Collection Strategies of the Nineties," in Waste Age. February,  1989,
      p. 60.

KJrkpatrick, George. "Policies and Politics of Composting and Recycling," in BioCvcle.
      Vol. 30, No. 1, January 1989, p.  60.

Mulvey, Francis and Jeremy K.  O'Brien. "Economic Considerations for Solid Waste
      Decision-Makers," in Resource Recovery. Vol.  3, No. 5, OctOw^r 1989, p. 13.

O'Brien,  Jeremy K. "Guidelines  for Implementing Cost Effective Curbside  Recycling
      Programs." HDR  Engineering, Inc., Charlotte, N.C., 1989, p. 4.

O'Rorke, Maureen,  and Betsy Hely. "Creating  a Public Information  Campaign that
      Works,* in Resource Recycling. Volume VIII, Number 2, May/June 1989, p 34

Powell, Jerry. The Public Wants Recycling," in Resource Recycling. Volume Vll, Number
      6. November/December 1988, p.32,

Powell.  Jerry. The Top Contenders  in New  Recycling Legislation," in   Resource
      Raevding. Volume Vll, Number 5, September/ October 1988, p. 18.

Riggle, David. "Only Pay for  What You Throw  Away," in  BioCvde. Voi  30  NO  2,
      February 1989, p. 39.
                                    VI. 6

Savas, E.S.  "How  Much  Do Government Services  Really Cost?,"  in Urban  Affairs
      Quarterly. Vol.15 No. 1, September 1979, pp.23-42.

Skumatz, Lisa, "Buck is Mightier than the Can," Biocvcle. January 1990.

Skumatz. Lisa, "Garbage  by the Pound," Resource Recycling. Vol. VIII No. 7,
      November 1989.

Skumatz, Lisa, "Garbage  by the Pound: Seattle Tests Garbage Rate Alternatives,"
      Environmental Decisions. December 1989.

Skumatz,  Lisa, 'Volume-Based  Rates:  Your  Best  Recycling  Program," Resource
      Recovery. Vol. 3 No. 5, October 1989.

Sproule, Kimberly A, and Jeanne M. Cosulich. "Higher Recovery Rates: The Answer's
      in the Bag," in Resource Recycling. Volume VII, Number 6, November/December
      1988, p. 20.

Stevens, Barbara J., Ph.D. "How to Figure Curbside's Cost,"  in Waste Aoe. February
      1989, p. 52.

Stevens, Barbara J., Ph. D. "How to Finance Curbside Recycling," in  BioCvcle. Vol. 30,
      No. 2, February 1989, p. 31.
                                    VI. 7

                          1.5  /ACKNOWLEDGEMENTS
The following  people provided  helpful  information  on the operation of their own
jurisdictions' solid waste procedures during  the information gathering phase of this
project, and reviewed drafts of the document:
Steve Besky
Department of Public Works
Minneapolis, Minn.

Wayne Bradley and  Israel Sierra
Public Works and Urban Development
Plainfield, N.J.

Ed Campbell
Philadelphia  Recycling Office

Ann Finn
Solid  Waste  Department
Tampa,  Fla.

Debbi Fyffe
Department of Public Works
Boulder County, Colo.

Thayer Jorgensen
Solid  Waste  Utility
Tacoma, Wa.

Bob Larson
City of SL Louis Park. MM.
                      Allen Loomis
                      Borough of Carlisle, Pa.
                      William Magraine
                      Hempstead Township, N.Y.

                      Mike Miller
                      Department of Public Works
                      Palo Alto, Ca.

                      Woody Raine
                      Solid Waste Services
                      Austin, Tx.

                      Jon Root
                      Santa Monica Recycle
                      Santa Monica, Ca.

                      Chris Veto
                      Office of Environmental Management
                      San  Jose, Ca.

                      Bryan Weinert
                      Resource Recovery and Solid Waste
                      Ann Arbor, Mi.
Bob Let
Summit N J.
                                   VI. 8

The following employees of'the Seattle Solid Waste Utility provided the authors with
loads of helpful information during grueling interrogation-style interviews:
Bill Ankney               Lorie Parker
John Anthony            Ginny Stevenson
Ticiang Diangson         Ed Steyh
Theresa Hill              Tom Tierney
Jack Palmer              Carl Woestendieck
Other valuable interviews took place with:

Bill AJves, Seattle Water Department
MaryKay Doherty, Seattle City Attorney's Office
Will Patton, Seattle City Attorney's Office
Jeffrey Showman, Washington Utilities and Transportation Commission

The following provided valuable information and/or reviewed drafts of the document:

Lee Blum, Town of Lewisboro, NY
Michael Bussed,  U.S. EPA, Region 10, Seattle, WA
Denise C. Byrd,  RTl, Research Triangle, NC
Dwight Dively, Seattle City Council, Seattle, WA
Diana Gale, Seattle Solid Waste Utility,  Seattle, WA
John Gibson, Gibson Economics, Seattle, WA
Dr. Haynes Goddard, University of Cincinnati, OH
Tim Goss, Seattle Solid Waste Utility, Seattle, WA
Pete Grogan, RW Beck, Seattle, WA
Robin R. Jenkins, Unrv. of Maryland,  College Park, Man/land
Ray Hoffman, Seattle Solid Waste Utility, Seattle, WA
Valerie Lenz, Recovery Sciences,  Del Mar, CA
Hans Van Dusen, Seattle Solid Waste Utility, Seattle, WA
Kenneth  L Woodruff, Morhstown, PA
Finally, the following organizations were essential to the success of this project:

U.S. Environmental  Protection Agency
Seattle Solid Waste Utility
The CEIP Fund
The Governmental Research Assistance Library of the Seattle Public  Library
                                     VI. 9

                     TO SOUP WASTE DECISION MAKING
Below is a list of worksheets and computer programs that can be useful in solid waste

Analyzing Local Recycling Centers. Ohio Department of Natural Resources, Division of
Litter  Prevention and Recycling, Fountain Square, Columbus, Ohio 43224.
      This Lotus template provides a format for cost and revenue analysis for recycling
programs ranging from drop off centers to curbside collection.

Coming Full Cirde. Environmental Defense Fund, 257 Park Avenue South, New York,
N.Y. 10010.
      A strong overview of recycling tactics currently in use.  Includes a great deal of
specific information about existing recycling efforts.

Comprehensive Curbside Recycling: Collection Costs and How to Control Them. Glass
Packaging Institute,  1801 K Street N.W., Suite 1105-U Washington, D.C. 20006.
      A concise and well-organized guide to the financial issues involved in the creation
of a new recycling program.

Evaluating Residential Refuse Collection Costs:  A workbook for  Local Government.
Public Technology Incorporated, 1301 Pennsylvania Ave. N.W., Washington, D.C. 20004.
      Step-by-step accounting procedures help planners avoid underestimates of costs
of city services.

The Recycling  Computer  Model, by W.B. Qapham, Jr., Department of Geological
Sciences, Cleveland State University, Cleveland, Ohio, 44115.
      Designed to determine "what kind of recycling  program  is best for the community
in  question" on the basis of a number of local variables.


  This list of E.P.A. recommended minimum content standards is  reprinted from the
  Federal Register. Vol. 53, No. 120, June 22, 1988 p.23564-5. Procuring products which
  meet these standards  can help create stronger markets for secondary materials by
  establishing industry standards for secondary materials.
High grade papers:
  Offset printing
  Mimeo/duplicator  paper
  Writing  (stationery)
  Office paper  (pads)
  High speed  copier paper
  Form bond  (computer paper,
  Book papers
  Bond papers
  Cover stock
  Cotton fiber  papers
Tissue Products:
  Toilet tissue
  Paper towels
  Paper napkins
  Facial tissue
  Industrial  wipers
Unbleached packaging:
  Corrugated  boxes
  Fiber boxes
  Brown paper (bags)
Recycled paptrboards
  Folding cartons etc.
  Pad backing
MIH. %



                                   ( )
  1. "Waste  Paper"  is defined here  to include postconsumer paper
  and paper  and forest product residues of industrial  processes.

  2. EPA  found insufficient production of these papers with
  recycled content  to assure adequate competition.

                            4.0  APPENDIX C'  ORDER FORMS
                                    C;~V 01- ^i'.
                                  KMJITST  FOK  PROF-USA!,
                                AND COLLECT I ON CONTRACTS
                                                  * of
 Ho-i'e Collection of Source Separated
    Reeyc:a3ie Material F/P

 Recycle America Collection Contract (Northend)

 Recycle Seattle Collection Contract (Southend)
                                                                 S3. 21



 Residential  Solid  Wast* Collection            '
   and Related  Optional Services AFP

 General  Disposal Collection  Contract  (Northtnd)

 C.S. Disposal Collection Contract  (Southtnd)


                                              2?P CODS
Please enclos*  a  chtck or eoney ordtr for the full  a»ount  for  ccc^ients  requsstei
payable to Pvtort I«prti»lon».   The prlet of each  document reflects  only the-*^:u
costs ef prlntlnf.
Requests for documents  snould  bt  sent to:
                            Clnny  Stevenson
                            Seattle  Solid Waste  Utility
                            503  Dexter Horton Bide.
                            710  Stcond Avt.
                            Seattle.  HA  98103


To order additional copies of this document or its companion volume, please enclose
a check or money order for the full amount for the coumems requested, payable to
Future Impressions.  The price of each document reflects  only the  actual  cost of
printing and mailing.
      NAME 	   PHONE

Number of Volume  I. Variable Race Handbook,  requested 	(at $10.00  each)
Number of Volume  II, Variable Rate Handbook, requested 	 (at $37.20 each)

Requests for the documents should be sent to:

Winnie Hooker
U.S. Environmental Protection Agency
Region 10, Solid Waste Program
1200 Sixth Avenue
Seattle, Washington 98101

Additional copies  of this document or its  companion volume  may also be ordered
through the National Technical Information Service (NTIS).  Please request the  following
document numbers:

EPA 910/9-90-012a      Skumatz, Usa A., Ph.D., and Cabell Breckinndge, Variable
                        Rates in Solid Waste: Ha