Ask Gino: Why are garbage rates going up?
Gino Gasparini is the community affairs manager for Recology San Mateo County. He lives in Redwood City. His OP-ED piece appeared in the Daily News, San Mateo County, on October 17, 2011.
I spend a significant part of my day visiting with our customers, attending community meetings with neighborhood associations, service clubs, chambers of commerce and a host of other groups. In these meetings I get the same question from everyone — “Why are our rates going up again?” The common assumption is that our company, Recology San Mateo County (RSMC), is somehow allowed to charge whatever we want for our collection services.
However, the truth is very different from the perception. RSMC is simply the collection service provider to the 12 member agencies that make up the South Bayside Waste Management Authority (SBWMA or RethinkWaste) service area. We are not the rate-setting entity, we simply charge a contractually agreed upon cost to provide collection service. Moreover, while the percentages that rates are going up seem alarming, the actual dollar amounts are quite reasonable for the new and improved services being provided, in an area that has some of the lowest established collection rates in the Bay Area. The reality is that Recology’s cost is just one component of the collection rates set by the 12 agencies. For instance, within the rates set by cities, there are costs for disposal at the landfill and processing charges for the recycling and organics handled by a different contractor, South Bay Recycling, as well as the cost to close out the previous contracts with Allied Waste [totaling $10+ million].
To complicate things even more, a significant contributor to collection rates increasing for many cities this year is the impact of residents subscribing to smaller garbage carts — otherwise known as cart migration. Many residents have increased recycling and composting, which has helped them reduce their garbage service levels considerably, and since rates are lower for the smaller garbage cart sizes, they are able to reduce their monthly charges.
This cart downsizing is a very positive thing, and coupled with the amount of material we pick up, tells us definitively that the recycling collection programs are working well, since we have increased recycling and compost volumes across the board by more than 30 percent. This is a good thing and it is what RethinkWaste and the CartSMART program sought out to do when choosing a new collection system and Recology as its new collection services provider.
Though a bit counterintuitive, the effort or time spent and the cost to service a 20-gallon cart is essentially the same as the cost to service a 32-, 64- or 96-gallon carts. In all instances, the same number and type of trucks are used, the labor costs are the same and the same infrastructure requirements are necessary. Yet, the rates charged to residents are based on the size of their garbage carts, and they are significantly discounted when using a smaller garbage cart.
This rate structure was put in place for a good reason: it provides an incentive for recycling over disposal — a highly commendable and sustainable purpose, and it has yielded cost savings to people who recycle.
However, because of the success of the new CartSMART program, and based on the rates established, the balance of large carts to smaller ones has shifted and many of the RethinkWaste member agencies have found themselves collecting insufficient revenue through their rates to cover the costs of providing the service and are therefore in a position where adjustments are necessary to account for past revenue shortfalls and to help prevent future shortfalls.
This explanation of rate setting is not to suggest that Recology’s costs are not increasing. They are. Our collection service costs to the RethinkWaste member agencies have an average rate impact of 2.2 percent from 2011 to 2012. The reason for this increase is due to contractual adjustments based on consumer price index, fuel costs and labor costs. The truth is that Recology would prefer not to raise collection rates. But the fact is, based on our contracts, our costs rise and/or fall based on established indexes to cover adjustable items like fuel and labor. What is also fact is that while our cost increases are part of the rate increases, they are a small portion of them and they are not done on a whim, but instead are based on solid, nationally indexed, contracted and approved formulas.
We understand that rate increases are never easy. We also understand that the percentages being discussed are large. We ask you to keep in mind that the actual dollar amount is minimal and are only due in small part to Recology’s allowable cost increases. We also ask you to keep in mind that the new CartSMART program is providing great results and has been warmly received. It also is a critical step in meeting new state recycling goals established by Assembly Bill 341 that sets a 75 percent recycling goal for California by 2020 — the most ambitious in the nation.
Recology San Mateo County is proud to be a part of this successful program and is committed to helping our community and cities that we serve achieve the highest level of recycling through the new CartSMART weekly collection program.