The Clinton Herald, Clinton, Iowa

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March 27, 2013

City to decide whether to stay in solid waste business

CLINTON — The Clinton City Council is once again reviewing solid waste service costs, thinking that now may be the time for the city to take a hard look at whether it should be in the solid waste business at all.

The council on a 4-3 to vote Tuesday sent on a solid waste study report completed by Springsted Inc. to the City Services Committee for further review. In the motion to make that move, At Large Councilman John Rowland also proposed that the City Services Committee and staff would be directed to assemble requests for proposal for solid waste bids from the city and private contractors for residential solid waste pickup for the entire city, with two of those proposals to be returned to the City Council Committee of the Whole for consideration. That part of the motion also was approved.

Struck from the motion was his request that the City Services Committee’s two selected proposals be placed on the November 2013 city election ballot for a nonbinding vote of the public. More study has to be done to see if such a vote is allowed under law.

Voting to approve sending the study to the committee and the RFP creation were Ward 2 Councilwoman Julie Allesee, At Large Councilman Charlie Mulholland, At Large Councilwoman Jennifer Graf and Rowland; voting against the measure were Ward 1 Councilwoman Maggie Klaes, Ward 4 Councilman Paul Gassman and Ward 3 Councilwoman Bev Hermann.

The motion was made after a presentation by Nick Dragisich of Springsted, which did a study of the city's solid waste rate structure and the costs of services provided.

Currently the solid waste fund is $1.8 million in the red, the result of uncollected revenues and the purchase of $2 million in trucks and waste carts — capital purchases that had no established funding mechanism, the report states.

The Solid Waste Fund saw negative operating income in fiscal years 2009 through 2013, with negative operating income projected in the 2013 budget. The report says that in addition to those operating deficits, the fund's capital expenditures in 2011 and 2012 depleted its cash reserves, which went from $600,000 at the beginning of fiscal year 2010 to a negative position of about $1.85 million at the end of fiscal year 2012.

The 2013 budget anticipates a more modest operating loss of $81,193, with little improvement in cash reserves that remain negative at about $1.8 million, the reports says.

To get out of that hole, Springsted says the city would have to increase rates to cover the cost of services and the capital costs.

Under the current fee schedule, the report said, solid waste costs are recovered by the solid waste collection fee, while all other costs are collected through a flat fee charged to all residents.

“Assuming that this fee structure remains unchanged, we calculate that the current fee for solid waste would need to be increased from its current rate of $5.25 per month to a level of $7.46 per month,” the report says. “The flat fee for other solid waste services would need to increase from $9.25 to 10.79 per month.”

For 2014, the total monthly charge for residential customers who use the city's solid waste service would rise from $14.50 per month to $18.24, an increase of $3.74 per month.

The report then details raises for the years 2015 through 2019, with the rates totaling $21.48 per month in 2019.

Also as a means of restoring cash reserves to the fund, “we have estimated the city would be paying for debt service if it had financed these capital purchases (the trucks and carts) through the issuance of debt,” the report says.

The report shows that if these capital acquisitions had been financed over 10 years at 3 percent interest the annual payment would have been $292,286.

“If we include the $292,286 in our cost of services, it will combine with the current $142,447 in annual deprecation expenses to provide the enterprise with a cash surplus of $434,733 annually,” the report says. “We project that this would be sufficient to restore the solid waste fund to positive cash in 2018 and to have adequate cash reserves by 2019.”

Springsted officials state in the study that assuming their recommended fees are implemented at the beginning of the 2014 fiscal year, they anticipate the solid waste fund will show positive operating income of $292,286 annually.

“This operating surplus, when combined with the fund's depreciation expense, will provide the fund with $434,733 of cash each year,” the report states.

Springsted predicts that the annual cash surplus will restore the fund to positive cash by 2018 and achieve adequate cash reserves by 2019.

During the presentation, Mayor Mark Vulich said that he is very frustrated by the position in which the city finds itself, since the council was told in 2010 that it had enough money to pay for the trucks and carts and that money was going to be funneled into the solid waste fund each year to build it back up.

After a discussion about that information as well as acknowledgment by City Finance Director Jessica Kinser that the city will attempt to recoup money for the robotics and electronic equipment that does not work, Graf said now is the time to see if the city should continue to offer the service.

“This gives us a chance to go back and look at whether this is a business we ought to be in,” she said. “There’s more conversation we need to have as a city about which way we want to go.”

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