Summary
To: Mayor Katica, Commissioners
From: JP Murphy, Assistant Town Manager
Date: 11/8/2016
Subject:
Title
Discussion of Pinellas County Landfill Tipping Fees
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Summary:
Pinellas County conducted a solid waste tipping fee study that indicated that there is a need for a significant increase in tipping fees at the landfill by 2030 and beyond. Key drivers to the increase are the reduction of revenue from the Purchase Power Agreement (PPA) with Duke Energy in 2024 and the need to begin budgeting for closure and post-closure care of the landfill which is currently an unfunded liability for the county.
The current tipping fee is $37.50 per ton. If left unchanged, tipping fees could drastically climb to $143.21 per ton by 2035. The county subsequently proposed three rate stabilization alternatives to the Technical Management Committee (TMC) to mitigate the impact of such a dramatic increase to its customers. The leading alternative is to gradually increase tipping fees now, so that reserves can be built up and provide continued stabilization to the tipping fee rate. An excerpt from the attached PowerPoint document shows a brief summary of the three models.
Staff will further discuss at the meeting the three alternatives and will be seeking input from the commission to pass along to our TMC representative.
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Previous Commission Action: N/A
Background/Problem Discussion: The capacity payment from the County’s Power Purchase Agreement (PPA) with Duke Energy is currently the largest source of revenue for the Solid Waste Enterprise funds. The capacity payment increases 6% per year, by contract, which has offset the impact of inflation and allowed the County to maintain the tipping fee at $37.50 per ton. The PPA expires Dec 2024. Based on the current standard offer conditions (as supported by recent PPA renewals in other municipalities), the County can expect to see a significant decrease in capacity revenue at that time. There will be a significant increase in tipping fees required by (estimated) FY30 to cover operating costs. Implementing tipping fee increases earlier will allow for a more manageable and gradual increase.
Additionally, the cost for landfill closure is significant and may come at a time when the Solid Waste Department has significantly less revenue. Post-Closure Care is legally required for a minimum of 30 years after the landfill is certified as closed. These two costs constitute an unfunded liability for the County. The county has implemented partial closure and will continue to close portions of the landfill as they are completed. Partial closures enable spreading the closure costs out over the life of the site. The county proposes to create a separate Post Closure Reserve Fund or increase the recommended minimum reserve level, to account for Post-Closure Care Costs. This funding was also included in the financial models attached. Building reserves for Post-Closure Care allows the county to fund the landfill’s “retirement.”
Expenditure Challenges: The full cost of tipping fees must be recovered through user fees in solid waste. The town currently budgets $125,400 for tipping fees. Using the proposed rates from alternative one, and assuming tonnages that equal the current budget, the average 4.27% increase over the next 20 years, beginning in 2018, would constitute an annual increase of approximately $10,000 each year, eventually peaking at tipping fee costs of $176,000 annually in 2035.
Using the proposed rates from alternative two, and assuming tonnages that equal the current budget, the average 5.65% increase over the next 20 years, beginning in 2025, with an initial 17.44% spike, would constitute an annual increase of approximately $26,000 dollars each year, eventually peaking at tipping fee costs of $291,000 dollars annually in 2035.
Using the proposed rates from alternative three, and assuming tonnages that equal the current budget, the average 6.48% increase over the next 20 years, beginning in 2027, with an initial 24% spike, would constitute an annual increase of approximately $39,000 dollars each year, eventually peaking at tipping fee costs of $354,000 dollars annually in 2035.
Recommendation: I recommend that the commission express their support for alternative one to the county. The smoothing of the gradual fee increase is better for our small revenue stream which is sensitive to volatile swings in expenses.
Proposed Motion: I move to support alternative one, gradually increasing the tipping fees