Chapter 7 – Utility Funding

This chapter describes Waste ReSources’ current financial position including the Utility’s revenue and expenditures and resources needed for Plan implementation.

Like other City utilities, Waste ReSources operates as an Enterprise Fund, meaning it is a self-supporting government fund that sells goods and services to the public for a fee. Like a business, the Utility raises revenues from fees for services and receives no funding from taxes or levies. Some Utility services — such as the drop box program for C&D and recycling as well as commercial recycling and organics services — are offered in a competitive environment with private services providers. Unlike a business, the Utility does not have a profit motive. The Utility strives to recover only its expenses while maintaining sufficient cash flow for sustainable operations and charging customers fairly.

Customer Rates and Rate Structure

Most Waste ReSources customers are billed bi-monthly along with their other utility services. Some Waste ReSources customers receive monthly billing. These include some high-volume water customers who get monthly billing for budgeting purposes, customers who share a water meter with another business but need separate solid waste services, and most drop box and compactor customers. Current monthly fees can be found in the Olympia Municipal Code, Section 04.24.010 C. As described in Chapter 4, Waste ReSources provides service to four major customer classes.

1.    Collection of commercial garbage. Businesses and larger multifamily properties that need frequent collection of small, moderate, and large volumes using carts and dumpsters.

2.    Curbside collection of single-family residential waste (garbage and recyclables). Single-family and smaller multifamily residential households that need frequent collection of relatively small volumes using carts.

3.    Drop box (or compactor) collection and hauling. Large-volume waste generators for whom it is cost-effective to use a large container such as a drop box or compactor, either occasionally and short-term or frequently and long-term.

4.    Collection of residential and commercial organic materials. Organics customers who generate regular small and moderate volumes using carts and dumpsters.

Garbage collection rates are based on container type, size, and pick-up frequency. Charging by volume (size and type of container) provides an incentive to recycle more and generate less garbage. The “pay-as-you-throw” system means customers who throw out less can downsize their garbage containers and pay less. All residential and commercial customer rates for carts and dumpsters are set so those who need larger containers pay a higher rate. Current technology is not yet reliable enough to allow the Utility to charge cart and dumpster customers by actual collection weights. Drop-box and compactor customers, whose containers are transported to disposal and recycling sites for weighing and emptying, pay both a hauling fee and a direct disposal and recycling fee based on the actual weight of discarded material.

Almost 99% of Olympia’s single-family residential customers subscribe to collection services that include recycling for no additional fee. Garbage collection fees are lower for these customers who recycle than for customers who do not subscribe to recycling. This discount both incentivizes recycling and recognizes that the revenue from the sale of recyclable materials partially offsets processing fees, making recycling less expensive than landfill disposal. Landfill disposal costs at the Waste and Recovery Center (WARC) are approximately $119 per ton (Fall 2021) and are expected to increase. For each additional ton of material recycled or composted, historically, Waste ReSources saved between $75 and $100 of disposal costs. Multifamily customers also receive commingled recycling service at no additional cost.

The Cost-of-Service Study (Appendix 2) found that the Waste ReSources Utility presented a balanced budget at the fund-wide level but also recommended addressing rate disparities between each of the four cart sizes for single-family residential customers. To cover rising expenses over the past several years, Waste ReSources has used across-the-board percentage-based rate increases, which have resulted in greater fee disparities between each of the four garbage cart sizes (20, 35, 65, and 95 gallons). The planned follow-up rates and costs study to revise the rate schedule and develop a multi-year rate model will include an examination and changes to address these disparities.

The Utility offers organics collection for separate fees. Single-family residential customers can subscribe to yard and food waste collection using 95-gallons carts, and it is available to multifamily customers and some commercial customers upon request. Based on a preliminary analysis in the Cost-of-Service Study, including organics collection in the bundled residential service (similar to recycling) would slightly reduce the cost of service to the 63% of single-family customers who currently subscribe to organics service. For single-family customers without organics collection, the cost of service would increase by about $7.40 per household per month. Bundling organics simplifies billing and spreads the cost of service across a larger customer base. Based on Olympia’s experience with bundling recycling, bundling organics is very likely to increase diversion of compostable yard and food waste. The Utility would need to increase trucks and driver capacity accordingly to accommodate the increased number of customers using organics service.

Commercial food waste collection is available using 95-gallon carts up to 2-yard dumpsters. Like garbage fees, commercial food waste collection fees are based on container size and collection frequency. With a few exceptions, Waste ReSources does not collect recycled materials from commercial customers. Instead, businesses may choose to subscribe to recycling services from a private hauler, most of which prefer to collect only materials with the highest value from customers who generate large quantities.

Revenues and Expenditures

Nearly all (99%) of the Utility’s revenue is generated through customer fees and charges, with minor amounts from the sale of scrap metal, grants, and investment earnings. The largest expenditure categories are for transport and tip fees associated with collection as well as staff salaries and benefits, primarily for collection. Table 7 summarizes Waste ReSources’ revenues and expenses over the past few years.

 

Table 7 Revenue and Expenditures by Budget Classification

	2022	2021	2020	2019
	Budget	Budget	Actual	Actual
REVENUE
Charges for Services	13,502,333	13,396,636	12,882,328	12,528,806
Intergovernmental	-	-	57,242	67,828
Other Revenue	197,004	58,818	277,941	245,137
Total Revenues	13,699,337	13,455,454	13,217,511	12,841,772
EXPENDITURES
Transport and Tip Fees	4,540,934	4,783,802	4,832,538	4,379,144
Salaries and Benefits	3,346,206	3,253,771	3,006,716	3,149,989
Fleet, Equipment, and Fuel Costs	1,727,957	1,723,318	1,546,355	1,548,632
Taxes and Interfund Payments	1,792,047	1,749,387	1,480,950	1,618,360
Services from Other Departments	978,605	935,536	969,126	826,847
Operational supplies and services	681,634	594,210	524,127	476,537
Capital Improvement Fund Contributions	613,000	368,000	398,667	736,000
Total Expenditures	13,680,383	13,408,024	12,758,478	12,735,509
Net Gain or (Use) of Fund Equity from Operations	106,262	459,033	47,430	18,954

The Utility maintains a reserve fund matching at least 10% of its annual budget. At times, the Utility’s operational efficiencies and conservative budget management result in amounts exceeding 10% that can be used to buy down customer rates or used for capital expenses, such as trucks or equipment needs. The Utility has used these excess reserve funds to smooth customer rate increases. As of 2022, the Utility’s reserve requirement was approximately $1.3 million and total resources available was approximately $3.0 million.

Resources Needed for Plan Implementation

Most strategies in the 2023 2030 Plan continue or build upon existing programs, while a few are new. This Plan does not change staffing for the Waste Prevention and Reduction Program. Most of the planned strategies will be implemented using existing resources. Customer growth, inflation, and service expansion, if implemented, could increase required expenditures and collection operations staff. At the same time, customer growth will generate additional revenue from customer rates to cover some of these expenditures. As necessary, the Utility will use rate increases to adjust for inflationary costs. Waste ReSources will also apply for grants that align with the Plan strategies, as they become available.

Table 8 show potential additional annual expenses for a new capital facility and the consultant studies identified in strategies.

Table 8 Potential Added Annual Expenditures for Plan Implementation by Service

Description	2022	2023	2024	2025	2026
Capital Improvement Fund*	613,000	618,000	627,270	636,679	646,229
Facility Improvements	10,000	25,000
Updated Rates & Costs Study (Consultant)		75,000	75,000
Updated Fleet Electrification Study (Consultant)					40,000

*    Capital Improvement Fund contributions are also shown in Table 7 as they have also occurred in the past.