HomeMy WebLinkAbout2023 10 09 Regular 500 - Discussion on Implementing a Rate Increase for Solid Waste Collection Services.REGULAR AGENDA ITEM 500
CITY COMMISSION AGENDA | OCTOBER 9, 2023 REGULAR MEETING
TITLE
Discussion on Implementing a Rate Increase for Solid Waste Collection Services.
SUMMARY
At the August 14, 2023 City of Winter Springs Commission Meeting, Mr. John Culbertson and
Mr. Francesco Canepa from MSW Consultants presented a preliminary review of the City's
Solid Waste revenues and expenditures. Currently the City charges its residential customers
$18.10 per month for curbside collections services which includes trash collection 2
days/week, 1 recycling and 1 yard waste collection per week. This fee has been in place
since at least March of 2006 when the City first contracted with Waste Pro.
The Seminole County Solid Waste increased it's "tipping" fees (disposal) effective January 1,
2024 by 5.25% from $37.58/ton to $39.55 per ton, (Section 20.40 Seminole Co
Administrative Code).
There analysis included reviewing the terms and conditions of the Waste Pro contract and
the inevitable cost escalation in 2027 when the City will need to re-bid the contract. It also
included a review of the interlocal agreement with the County and the rates that
neighboring cities are both paying for collections services and charging their residential
residents.
Staff requested a change the evaluation prepared by MSW. After a meeting with Seminole
County, we believe it is likely the County will begin charging for recycling curbside pick up.
Currently the City does receive an environmental rebate of approximately $4,500-$4,700
per month. Should the County begin to charge for this service, the extra charge will offset
this rebate.
Attached you will find the updated report with small variations in the 3 proposed increases
that were presented in August.
FUNDING SOURCE
N/A
RECOMMENDATION
Staff requests direction on which of the rate increase options presented here to implement.
Staff will then come back with a resolution representing the decision at a future meeting.
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Solid Waste Rate Study
FINAL REPORT
Prepared by October 4, 2023
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This Report was delivered electronically. If it is necessary to print a hard copy, please
use recycled-content/FSC-certified paper and recycle when no longer needed.
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Winter Springs, FL i
TABLE OF CONTENTS
1. INTRODUCTION ................................................................................................... 1
2. METHODOLOGY ................................................................................................... 1
3. CONTRACTUAL ESCALATION ........................................................................... 2
4. BENCHMARKING ................................................................................................. 4
5. FINANCIAL MODEL ............................................................................................. 5
5.1 Current System ............................................................................................................................. 5
5.2 Operating Reserve Policy and Status Quo Projections .......................................................... 6
6. RATE RECOMMENDATION ................................................................................ 7
6.1 Rate Path Options ........................................................................................................................ 7
6.2 Rate Recommendation ................................................................................................................ 7
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TABLE OF CONTENTS
ii Winter Springs, FL
List of Figures
Figure 3-1 Comparison of Contractual Escalation vs. CPI-All Items (Life of Contract) ...................... 3
Figure 5-1 Projected Reserve Fund Deficit with No Rate Increases ........................................................ 6
Figure 6-1 Projected Operating Results ........................................................................................................ 8
Figure 6-2 Projected Reserve Fund Surplus With Recommended Rate Increases ................................. 8
List of Tables
Table 3-1 Comparison of Contractual Escalation vs. CPI – All Items ..................................................... 3
Table 4-1 Benchmarking Summary (Monthly Rates and Charges) ........................................................... 5
Table 5-1 Full Cost Monthly Rates per Household ..................................................................................... 6
Table 6-1 Rate Path Options .......................................................................................................................... 7
List of Exhibits
Exhibit A – Benchmarking Data
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Winter Springs, FL 1
CITY OF WINTER SPRINGS RATE STUDY
1. INTRODUCTION
The City of Winter Springs (City) provides curbside collection service to its residential customers. The City
contracts with Waste Pro for these services, including garbage, yard trash, recycling, and bulky waste
collections. The City incurs administrative expense to manage the contract, establish service level policies,
provide public outreach and education, and plan future changes to the solid waste program. The City relies
on Seminole County to accept its wastes and recyclables for disposal or processing and pays the County’s
established disposal tip fees and recyclables processing charges on top of the cost of its collection contract.
Currently, the City charges a rate of $18.10 per household per month for these services, and pays Waste
Pro $16.13 per household per month for the performance of the curbside collection services. For disposal
and processing, the City pays Seminole County $37.58 per ton of refuse or yard waste and $0.00 per ton
recyclables. At this time, the City is expecting to incur significant increases in the cost of collection when
their current contract expires and it is necessary to procure a new contractor at current market rates, which
have risen appreciably due to recent macroeconomic forces.
Compounding matters, Seminole County (County) has published a 10-year projection of its disposal and
processing rates, which are expected to escalate at a much higher rate going forward. The County has also
signaled to the City that they are updating the financial terms for recyclables processing to improve
transparency and better share commodity market risk. This change will impose a significant processing
fee (per ton) on City recyclables, although is also expected to provide somewhat offsetting rebates based
on the value of secondary material sales (i.e., revenue share).
These impending increases to system expenses will require the City to raise its solid waste rates if the City
wishes to maintain break-even financial performance within its solid waste management program. MSW
Consultants (MSW) was retained by the City to conduct a solid waste rate study including a test year
revenue sufficiency projection and a five-year revenue sufficiency forecast that captures the impacts of
higher contract collection costs as well as more rapidly escalating disposal and recycling fees. The financial
model prepared for the City compares current rates to projected full cost rates. Based on these calculations,
MSW Consultants collaborated with City Finance and Public Works staff to develop and recommend rate
paths to assure the financial stability of the program.
2. METHODOLOGY
Development of the financial model followed conventional steps to utility rate analysis. An abbreviated
list of the study approach is shown in the bullets below.
Attend an in-person kick-off meeting,
Submit an initial data request,
Review the Solid Waste ordinance,
Review the Waste Pro contract as well as all amendments,
Review the interlocal agreement with Seminole County for material disposal and processing,
Compile internal administrative and management costs,
Forecast the growth of the customer base and select assumptions about inflation for the life of the
financial model,
Compare full cost rates to current rates to baseline revenue recovery,
Collaborate with City staff to design a rate recommendation including up to three rate paths,
Attend virtual meetings as needed to complete the work,
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CITY OF WINTER SPRINGS RATE STUDY
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Submit a concise draft report with supporting financial and rate exhibits, and
Submit the final report addressing City feedback on the draft.
3. CONTRACTUAL ESCALATION
The City is currently contracted with Waste Pro for the provision of solid waste, recycling, and yard waste
collection services for the City’s residential households. This contract is slated to expire in 2027. In what
has been a significant contractual benefit to the City, Waste Pro agreed to cap annual rate escalation to 2.5
percent for the life of the contract. While this escalation cap did not materially impair either party in the
early years of the contract, the recent period of high inflation has prevented Waste Pro from aligning its
rates with underlying cost increases. It is likely that a new contract, where bidders set their pricing based
on current market conditions, will result in significantly higher prices for Winter Springs.
To gain some perspective on the potential impact of resetting collection contract rates to market, MSW
compared the contractually capped rate escalation in the Waste Pro contract with the actual consumer
price index (CPI) changes over the life of the contract. The comparison was made using the All Items in
U.S. City Average, All Urban Consumers, Not-Seasonally Adjusted (CUUR0000SA0) CPI dataset.
Table 3-1 compares the contractually allowed increases to the actual CPI based on the above-mentioned
index. This table also projects the CPI inflation rate for 2023 through 2027, the end year of the current
contract.
Figure 3-1 shows this same comparison visually using 2006 as the base year.
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CITY OF WINTER SPRINGS RATE STUDY
Winter Springs, FL 3
Table 3-1 Comparison of Contractual Escalation vs. CPI – All Items
Year CPI - All Items
Waste Pro
Contractual
Escalation
2007 3.5% 2.5%
2008 3.7% 2.5%
2009 -0.2% -0.2%
2010 1.2% 1.2%
2011 3.5% 2.5%
2012 2.2% 2.2%
2013 1.0% 1.0%
2014 1.7% 1.7%
2015 0.2% 0.2%
2016 1.6% 1.6%
2017 2.0% 2.0%
2018 2.5% 2.5%
2019 1.8% 1.8%
2020 1.2% 1.2%
2021 6.2% 2.5%
2022 7.7% 2.5%
2023 5.0% 2.5%
2024 5.0% 2.5%
2025 5.0% 2.5%
2026 5.0% 2.5%
2027 5.0% 2.5%
Overall Change
Since 2006 88.5% 48.6%
Figure 3-1 Comparison of Contractual Escalation vs. CPI-All Items (Life of Contract)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
All Items Contractual Escalation
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CITY OF WINTER SPRINGS RATE STUDY
4 Winter Springs, FL
As shown, had Waste Pro been able to increase their rates in line with inflation, the City’s rates would be
substantially higher than they are at the present time. When compared to All Items CPI, the contractual
rate escalation lags almost 40 percent. In the professional opinion of MSW Consultants, the contract rebid
in 2027 is likely to result in substantially higher rates than the City currently enjoys as the market seeks to
incorporate economic price increases into their services.
As shown above, it has been assumed that contract collection will jump at minimum of 40 percent when
the new collection contract is procured in 2027. Note that this is only an estimate; actual collection pricing
could increase more or less than the estimate used in this rate study based on market conditions at the
time of procurement. In the professional opinion of MSW Consultants, the increase is likely to be higher
than 40 percent, as we are aware of other communities in Florida that have experienced price increases
above 60 percent upon rebidding a long term, expiring collection contract.
4. BENCHMARKING
It is informative to compare the service levels and costs of solid waste collection and disposal in Winter
Springs with other Central Florida municipalities and counties. The City provided benchmarking data
collected by the City of Lake Mary, which is summarized here and includes various data points such as:
Households counts,
Monthly charge to residents,
Service provider for curbside collection,
Monthly cost per household paid to service provider,
Collection technology,
Collection frequency, and
Contract expiration dates.
Exhibit A contains a detailed tabular comparison, while Table 4-1 below summarizes shows the most
relevant comparisons from the perspective of setting solid waste rates for residential services. (Note that
MSW Consultants has not verified the validity of all the data points provided, but believes the data are
reasonable based on our knowledge of the industry and the regional market.)
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CITY OF WINTER SPRINGS RATE STUDY
Winter Springs, FL 5
Table 4-1 Benchmarking Summary (Monthly Rates and Charges)
Municipality
Households
Service
Provider
Solid Waste
Rate per HH
Collection
Cost per HH
Garbage
Frequency
Recycling
Frequency
Yard Waste
Frequency
Contract
Expiration
Oviedo 12,462 Waste Pro $25.00 $17.35 1x/wk 1x/wk 1x/wk 09/30/23
Seminole
County 68,994
Advanced
Disposal &
Waste Pro
$25.00 $14.24 2x/wk 1x/wk Varies 12/31/27
Casselberry 7,976 Waste Pro $24.15 $17.10 2x/wk 1x/wk 1x/wk 12/31/27
Longwood 5,251 Waste Pro $24.05 $21.46 2x/wk 1x/wk 1x/wk 09/30/25
Maitland 3,869 Waste Pro $23.75 $14.22 2x/wk 1x/wk 1x/wk 09/30/23
Altamonte
Springs 6,792 City $22.75 N/A 2x/wk 1x/wk 1x/wk Ongoing
Lake Mary 5,543 Waste Pro $20.90 $16.45 1x/wk 1x/wk 1x/wk 02/28/22
Sanford 14,939 Waste Pro $20.76 $16.91 2x/wk 1x/wk 1x/wk 05/31/26
Winter Park 9,300 Waste Pro $18.71 $14.48 2x/wk 1x/wk 1x/wk 10/01/23
Winter Springs 12,466 Waste Pro $18.10 $16.13 2x/wk 1x/wk 1x/wk 02/28/27
As shown in this table, Winter Springs’ current solid waste rates are the lowest in the region. Further, the
spread between collection costs and the full solid waste rate is extremely low for Winter Springs. In the
opinion of MSW Consultants, Winter Springs has provided a high level of service to its residents at an
extremely low cost. However, this study illustrates that it will not be possible to sustain such low rates.
5. FINANCIAL MODEL
5.1 CURRENT SYSTEM
MSW Consultants developed a financial model using data provided by the City to build a normalized
estimate of annual system revenues and full cost. The projections incorporated the City’s policies for
maintaining a cash operating reserve in addition to covering full system expense. The model combines the
following information:
The starting reserve balance for FY23,
Household counts and annual household growth rates,
Waste Pro CPI adjustment projections for contracted collection services,
Seminole County CPI adjustment projections (as stated in Seminole County’s 2022 Solid Waste
Revenue Sufficiency Analysis conducted by Stantec) affecting disposal charges,
Seminole County to charge for recyclables processing (the model assumes 2025 will be the first year),
General fund transfer allocations for customer service, franchise fee, and storm reserve obligations,
Tonnage (waste generation) for garbage, recycling, and yard waste streams,
Environmental revenue share from Seminole County, and
Commercial, roll-off, and residential franchise fee revenues.
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CITY OF WINTER SPRINGS RATE STUDY
6 Winter Springs, FL
Based on these inputs, the current monthly rate of $18.10 was found to be insufficient to meet the City’s
revenue needs. Table 5-1 shows the actual monthly cost per household for 2023 and the projected monthly
cost per household for 2024 through 2032. Note the expected significant increase in 2027, which is based
on the expectation that contract collection pricing will increase significantly based on market conditions
at the time of the procurement.
Table 5-1 Full Cost Monthly Rates per Household
Year 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Waste Pro CPI
Adjustment Rate N/A 2.50% 2.50% 2.50% 39.90% 5.00% 5.00% 5.00% 5.00% 5.00%
Seminole County
CPI Adjustment
Rate
N/A 5.25% 5.25% 5.25% 5.25% 4.75% 4.75% 4.75% 4.75% 4.75%
Monthly Full Cost
Rate per HH $21.13 $21.80 $23.51 $24.27 $31.59 $33.15 $34.78 $36.50 $38.31 $40.20
Annual
Percentage
Increase
N/A 3.1% 7.8% 3.3% 30.1% 4.9% 4.9% 4.9% 4.9% 4.9%
5.2 OPERATING RESERVE POLICY AND STATUS QUO PROJECTIONS
Figure 5-1 below shows the projected balance of the solid waste reserve fund versus the projected reserve
fund requirement, set as 25 percent of annual operating expenses. As seen, the City is already below its
reserve fund requirement and without any changes to household rates, the City will experience an
increasingly large deficit in its solid waste program.
Figure 5-1 Projected Reserve Fund Deficit with No Rate Increases
($161,375)
($17,840,858)
$790,287 $1,572,487
($20,000,000)
($17,500,000)
($15,000,000)
($12,500,000)
($10,000,000)
($7,500,000)
($5,000,000)
($2,500,000)
$0
$2,500,000
$5,000,000
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Projected Reserve Fund Balance Projected Reserve Fund Requirement
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CITY OF WINTER SPRINGS RATE STUDY
Winter Springs, FL 7
6. RATE RECOMMENDATION
6.1 RATE PATH OPTIONS
Based on the analysis described in this report it will be critical for the City to plan on either (a) increasing
its customer charges if it maintain current service levels, or (b) reducing collection frequency when it
reprocures services. For the purpose of developing rate options, the City and MSW Consultants agreed to
assume that service levels in the new contract will not be reduced.
Under these assumptions, and in consultation with City staff, MSW Consultants identified three rate path
options for consideration by the City. The options are defined below and summarized in Table 6-1.
Option 1 – One-Year Shock with Subsequent Annual Escalator,
Option 2 – Two-Year Ramp Up with Subsequent Annual Escalator, and
Option 3 – Three-Year Ramp Up with Subsequent Annual Escalator.
Table 6-1 Rate Path Options
Rate Path Options 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Option 1
Rate Increase N/A 56.0% 4.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Monthly Rate per HH $18.10 $28.24 $29.37 $30.25 $31.15 $32.09 $33.05 $34.04 $35.06 $36.12
Option 2
Rate Increase N/A 26.0% 26.0% 5.0% 4.0% 4.0% 4.0% 4.0% 4.0% 3.0%
Monthly Rate per HH $18.10 $22.81 $28.74 $30.17 $31.38 $32.63 $33.94 $35.30 $36.71 $37.81
Option 3
Rate Increase N/A 19.0% 19.0% 19.0% 5.0% 4.0% 4.0% 4.0% 3.0% 3.0%
Monthly Rate per HH $18.10 $21.54 $25.63 $30.50 $32.03 $33.31 $34.64 $36.03 $37.11 $38.22
6.2 RATE RECOMMENDATION
MSW Consultants recommends that the City implement Option 2. This option spreads out the shock of
significantly higher rates over two years, while enabling the City to reset its solid waste operation and
financial management on a sustainable path.
Figure 6-1 and Figure 6-2 illustrate the benefits of implementing Option 2. Figure 6-1 confirms that these
rates will generate sufficient system revenue to accommodate projected and known underlying increases
in collection contract, disposal, and recycling expense. Figure 6-2 verifies that these recommended rates
allow the City to maintain an operating reserve to weather unforeseen disruptions in residential collection,
disposal, and processing services.
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CITY OF WINTER SPRINGS RATE STUDY
8 Winter Springs, FL
Figure 6-1 Projected Operating Results
Figure 6-2 Projected Reserve Fund Surplus With Recommended Rate Increases
It is particularly important to note that the recommended rate path positions the City closer to the
midpoint of customer charges in the Seminole County market in 2024. Thereafter, the City rates will be
positioned for the expected contractual collection cost increases from the re-bid process. While this
recommended rate path will likely be perceived as a shock by some customers, in practice it reflects a
correction of the City’s below-market rate structure that has evolved in the past several years and is not
sustainable. Additionally, these rate increases serve to reinforce the City’s reserve fund in a more rapid
fashion, with insufficient reserves only until 2024.
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Waste Pro Collection Charges Seminole County Disposal/Processing Charges
Combined Revenues
($161,375)
$1,649,226
$790,287
$1,572,487
($500,000)
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Projected Reserve Fund Balance Projected Reserve Fund Requirement
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Winter Springs, FL
EXHIBIT A
Benchmarking Data
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Winter Springs, FL
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Exhibit A - Benchmarking Data
Municipality Households
Solid Waste
Rate per HH Service Provider
Collection Cost
per HH Tipping Fees
Collection
Technology
Garbage
Frequency
Recycling
Frequency
Yard Waste
Frequency
Exclusive
Franchise Type
Contract
Expiration
Exclusive or Open
Market (Commercial)
Oviedo 12,462 $25.00 Waste Pro $17.35 Included Automated 1x/wk 1x/wk 1x/wk Residential 09/30/23 Open
Seminole County 68,994 $25.00
Advanced Disposal
& Waste Pro $14.24 N/A Manual 2x/wk 1x/wk Varies Residential 12/31/27 Open
Casselberry 7,976 $24.15 Waste Pro $17.10 Seminole County Manual 2x/wk 1x/wk 1x/wk Residential 12/31/27 Exclusive (Separate
from Residential)
Longwood 5,251 $24.05 Waste Pro $21.46 Included Semi-Automated 2x/wk 1x/wk 1x/wk Residential 09/30/25 Waste Pro
Maitland 3,869 $23.75 Waste Pro $14.22 Seminole County Mix 2x/wk 1x/wk 1x/wk
Residential &
Commercial 09/30/23 Exclusive
Altamonte Springs 6,792 $22.75 City N/A Unknown Semi-Automated 2x/wk 1x/wk 1x/wk Residential Ongoing Open
Lake Mary 5,543 $20.90 Waste Pro $16.45 Included Semi-Automated 1x/wk 1x/wk 1x/wk
Residential &
Commercial 02/28/22 Waste Pro
Sanford 14,939 $20.76 Waste Pro $16.91 Included Manual 2x/wk 1x/wk 1x/wk
Residential &
Commercial 05/31/26 Waste Pro
Winter Park 9,300 $18.71 Waste Pro $14.48 Seminole County Automated 2x/wk 1x/wk 1x/wk
Residential &
Commercial 10/01/23 Waste Pro
Winter Springs 12,466 $18.10 Waste Pro $16.13 Seminole County Mix 2x/wk 1x/wk 1x/wk
Residential &
Commercial 02/28/27 Exclusive
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Winter Springs, FL
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