Title
Solid Waste Resources, Infrastructure and Financial Plan
Description
This report provides the Transportation, Infrastructure and Innovation Subcommittee with an update on the Public Works Department’s Solid Waste utility financial plan for Fiscal Years 2021-25. Additionally, it discusses infrastructure investment and fleet capital planning, and the impacts of these costs on the Solid Waste financial plan.
THIS ITEM IS FOR INFORMATION AND DISCUSSION.
Report
Summary
Five-year financial plans for the City’s Solid Waste utility have been prepared by the Public Works and Finance departments, which reflect the capital infrastructure requirements, operating expenditures and financial requirements of the Solid Waste services.
These plans:
Provide for repair, replacement, and development of infrastructure necessary to ensure landfill, transfer station and materials recovery facilities meet regulatory and service requirements;
Provide all resources needed by Public Works to continue to provide reliable solid waste refuse and recycling services to Phoenix residents; and
Ensure a reliable fleet of equipment to provide effective collection services.
Revenues
Revenues for the Solid Waste Program are generated by monthly fees charged for residential household service, disposal fees charged at the transfer stations and landfill, sale of recycled materials, and other earnings. The adopted revenue budget for Fiscal Year (FY) 2020-21 includes $174.8 million from these sources. The monthly residential household service revenue accounts for 90.9 percent of total revenues, followed by disposal fees at 5.7 percent, recycling at 2 percent, and other revenues such as interest earnings, surplus vehicle sales, etc. at 1.4 percent.
In February 2020, the City Council approved the recommendation to amend section 27-48 of the Phoenix City Code to increase residential Solid Waste service rates and to amend section 27-53 of the Phoenix City Code to increase the Solid Waste disposal site fee applicable to customers disposing solid waste at City facilities. The City Council has taken the necessary actions to meet the needs of a rapidly growing city and maintain all existing Solid Waste services, which reflects the preferences expressed through the public feedback process.
As forecasted in the financial plan for FY 2021-25, revenue generated from the rates already approved by City Council will provide for the staffing, equipment and capital needs of the Solid Waste utility to ensure all services remain. Currently:
Residential revenue is in line with the forecast, projected at $158.4 million for FY 2020-21;
Disposal fee revenue at the two transfer stations is projected at $11.9 million for FY 2020-21. This is an increase of $2.5 million from FY 2019-20. The gate rate change coupled with growth in customer use of the transfer stations has resulted in the revenue increase; and
Sale of recyclables revenue is projected at approximately $6.8 million for FY 2020-21. This is an increase of $2.8 million from FY 2019-20. Improved market prices for commodities, particularly cardboard and paper, along with growth in recycling tonnage, have resulted in the increase.
Operating Expenses
Operating expenditures for FY 2020-21 are budgeted at $158.9 million. Of this total, approximately 87 percent of expenditures are for operation and maintenance and 13 percent for vehicles. Due to the COVID-19 pandemic, Solid Waste is projecting to spend $160.6 million to address the high, increased volume of residential refuse, recycle, and bulk trash tonnage. The additional expenditures will be offset by increased revenues and Coronavirus Relief Funds.
The Solid Waste utility increased its contribution to the Project Assist Utility Assistance Program from $70,000 per year three years ago to $220,000 in FY 2020-21. Contributions will further increase to $360,000 per year in FY 2021-22. The Project Assist Utility Assistance Program is designed to assist City of Phoenix residents in crisis situations by providing utility financial assistance services.
Fleet Asset replacement remains a critical priority for the Solid Waste utility to ensure unencumbered service delivery. Through a healthy vehicle replacement schedule, the utility has reduced the percentage of automated side loaders classified as in fair or poor condition from 69 percent of the fleet to 34 percent of the fleet as last year’s truck orders are delivered. Attachment A demonstrates the improving health of the Solid Waste fleet, consisting of automated side loaders, from the time the Solid Waste Rate Advisory committee was appointed by the City Manager in June 2018 to the anticipated state of the fleet in April 2021.
Capital Improvement Program
The Solid Waste Capital Improvement Program (CIP) includes infrastructure improvements at the landfills and transfer stations, landfill gas and groundwater monitoring, and equipment replacement at the 27th Avenue and North Gateway Material Recovery Facilities. The capital needs for Solid Waste are supported by PAYGO, bonds, and remediation funds. The FY2020-21 adopted five-year CIP for the Solid Waste Program is $76.8 million, and is broken down as follows:
SR85 Landfill: $28 million (37 percent);
Transfer Stations: $37 million (48 percent);
Closed Landfills: $9.3 million (12 percent); and
Other: $2.5 million (3 percent)
In the forecast, current rates support the operating budget, capital infrastructure, vehicle replacement and debt service requirements of Solid Waste, while maintaining the required $25 million minimum operating reserve, which is critical to protect the bond rating and provide for financial resiliency.
During the rate adoption process, the following potential program changes were discussed and are under review. A recommendation for these items will be brought back to the Subcommittee for information and discussion:
Rate for the small (individual 60-gallon) Solid Waste container;
Rate for an additional 90-gallon Solid Waste container;
Rate for an additional 300-gallon Solid Waste container;
Rate for subscription to the curbside yard-waste program; and
The bulk trash set-out schedule.
Department
Responsible Department
This item is submitted by Deputy City Manager Karen Peters and the Public Works Department.