Recommendations on Waste Management Policy Issues:
Importation of Waste and Gate Fee Increase
(Santa Ana, CA) - The Integrated Waste Management Department (IWMD) announces the department's intent to move forward on two major policy issues: importation of non-Orange County solid waste and increasing the landfill gate fee. Since Orange County's declaration of bankruptcy, IWMD has been considered one of the major factors in the County's plan to recover from the financial crisis. IWMD is one of the County's largest assets, as well as one of the County's biggest revenue generating mechanisms, as it owns and operates the only disposal facilities in Orange County.
Importation of Non-Orange County Waste
On May 1, 1995, IWMD issued a Request for Proposals (RFP) for acceptance of non-Orange County trash as a means of generating revenue to aide the County's financial situation. Currently, the County's three daily working landfills accept only Orange County waste, and trash generated outside of Orange County is prohibited from disposal by County ordinance. IWMD's RFP requests proposals from waste haulers and/or government entities outside of Orange County interested in using Orange County landfills if the ordinance is changed. If successful, importation of non-County trash could generate as much as $55 million annually for the County of Orange.
Since 1989, trash received at Orange County landfills has decreased by approximately 30 percent due to impacts of the recession and the success of community recycling. Tonnages are expected to continue in this decline as the cities and the County meet state mandated recycling goals and major recycling infrastructure comes online in Orange County. The Orange County Landfill System (made up of the Olinda/Olinda Alpha Landfill in Brea, the FRB Landfill in Irvine and the Prima Deshecha Landfill in San Juan Capistrano) was designed as a large volume disposal facility and is permitted to accept 16,658 tons of waste per day. Current volumes are only reaching 10,000 tons of waste per day. As a result, there is over 6,000 tons per day of available landfill capacity not being utilized by Orange County residents or industry. This additional capacity has significant economic value that could benefit the County of Orange during these critical financial times.
At current Orange County usage, the permitted life of the landfill system is approximately 53 years. However, to even further extend landfill capacity and maximize the life of the disposal system, in 1991 IWMD engineered masterplans for each of the landfills. With implementation of planned, masterplan improvements, the landfill life will extend to approximately 65 years. If non-County waste were accepted, the life of the landfill system (as based on the masterplan improvements) would decrease by 16 years, to result in 49 years of remaining capacity. Acceptance of 6,000 tons per day of trash at the minimum non-County rate of $30 per ton could generate as much as $55 million annually. While there are increased operating costs associated with importation of waste, these costs are nominal as the disposal facilities were designed to operate as a high volume disposal system.
IWMD is issuing the RFP to determine the level of interest from waste haulers and/or government entities outside of Orange County who would sign term-specific contracts in order to use predetermined amounts of Orange County landfill capacity. Proposals are required to meet criteria regarding tonnage, contract term, rate, destination, hours, equipment, security deposits, regulatory compliance and AB 939 compliance. IWMD anticipates interest from San Diego and Los Angeles wasteshed areas and, the destination of the waste will be submitted as part of the proposals.
The deadline for submitting proposals to IWMD is May 31, 1995. Based on the responses to the RFP, the subsequent approval process would include environmental analysis, and public hearings, amendment of the County ordinance and negotiation and award of contracts. The earliest that acceptance of non-County waste could begin is November 1, 1995.
Gate Fee Increase to $35.00
IWMD is recommending a gate fee increase to $35.00 per ton effective July 1, 1995. Based on staff analysis contained in the Department's Operational Financial Review IWMD has found that a steady decline in tonnage received at the County's landfills, coupled with increased regulatory requirements, will mean a serious shortfall in funds needed to operate the County's landfills over the next five years.
The report warns that unless waste disposal fees, or gate fees, are increased immediately, the county could face a $103 million deficit by 2000. County gate fees currently stand at $22.75 per ton, and have not been increased in four years. By comparison, Riverside, San Bernardino and San Diego Counties charge in the range of $34 to $43.
In 1989, County landfills collected 4.4 million tons of waste. Since then, landfill tonnage has dropped approximately 30 percent to 3.1 million tons. The decline can be attributed to a combination of factors, notably increased success of community recycling programs, the development of major recycling infrastructure and the ongoing slump in the construction industry.
IWMD has taken prudent steps to control operating costs. In an attempt to maintain costs, IWMD stopped operations at one of their four County landfills, Santiago Canyon, and reduced its staff. The department has deferred major capital improvement projects and, until the introduction of recent federal legislation, had been working in conjunction with Orange County cities to develop waste flow agreements that would help ensure that waste is not diverted to competing landfills in other Counties. As a result, gate fees have been frozen at the rate of $22.75 per ton for four years
At the same time that the County is experiencing a significant decline in tonnage, new environmental regulations have added millions of dollars in costs to landfill operations. Federal landfill requirements are expected to cost $60 million over the next five years, These requirements come at a time when it is also necessary to financially plan for the County's potential liability for closed landfill sites. Over the past 50 years, the County has owned or operated 21 landfills that are currently closed. Adequate reserves must be set aside to cover any potential County liability, as well as litigation costs that may be incurred as a result of the complex nature of environmental litigation.
Since the last gate fee increase in July, 1991, IWMD revenues have not been enough to cover anticipated expenditures. With this in mind, IWMD has continually been rephasing capital expenditures such that actual drawdown on the reserves is minimal. However, certain capital expenditures must begin in order to maintain operational efficiencies and system capacity. IWMD's five-year projections show that, even with a $35.00 per ton gate fee, reserve monies of $10 to $20 million each year are required to balance the budget. The ending cash balance level in FY 1999/00 is expected to be approximately $25 million.
Based on the impact of declining tonnages and increasing regulatory costs, the IWMD report recommends a gate fee increase to $35.00 per ton for the next five years. This increase will avoid a deficit and maintain a cash reserve level necessary for prudent landfill operations. This increase keeps Orange County's gate fee level competitive with competing facility and will negate the need for incremental increase in each of the next five years. IWMD estimates that this one time increase, will translate into an increase of approximately $2.00 per month for Orange County homeowners.
IWMD generates most of its revenues from gate fees charged to waste haulers. These fees are passed along to homeowners through city water bills, sanitation districts, property taxes, or directly by the hauler. In Orange County, household charges for collection and recycling range from $9 to $15 per month depending on the level of service.
The Waste Management Commission will discuss the proposed gate fee increase on May 11, 1995. This recommendation regarding a proposed increase will be passed on to the Orange County Board of Supervisors to be discussed at a special meeting on May 24, 1995. If the Board approves an increase, it would become effective July 1, 1995.
Importation and the Gate Fee Increase
Although importation of non-Orange County waste and the proposed increase in the gate fee are being discussed at the same time, the gate fee increase is necessary regardless of any plans for importation. IWMD's financial analysis is based on the most conservative tonnage projections available; these tonnage projections assume only Orange County waste. IWMD's intent is to plan for the most conservative financial situation over the next five year period, in order to avoid additional increases due to optimistic projections. If importation of non-County waste is successfully implemented, the Orange County gate fee could be lowered to reflect the infusion of revenue from the additional tonnage.
The County Integrated Waste Management Department administers Orange County's solid waste system. In this role, IWMD is responsible for developing the Countywide Integrated Waste Management Plan; providing disposal capacity in the form of landfills; environmental monitoring and maintenance for active and closed County landfills; and the Household Hazardous Waste Collection Program.