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October 9, 2007 > Newark faces increased garbage collection rates

Newark faces increased garbage collection rates

On July 1, 2007, only waste processed through the BLT Enterprises Transfer Station was accepted at the Durham Road Landfill. With this change, prompted by the construction of the new facility in collaboration with the City of Fremont, the cities of Newark and Union City were obligated to negotiate with Fremont to establish new rates including a "host fee" that allows Fremont to recapture its costs and provide an additional long term revenue stream. An agreement was announced at the September 27 Newark City Council meeting by Assistant City Manager Dennis Jones. TCV asked Mr. Jones about this agreement and its impact on citizens of Newark

TCV: How did Newark prepare for this price adjustment?

Jones: An 'Augmentation Fund' was created and built into the collection rates five years ago in anticipation of this increase. We will now use those funds to supplement the amount collected from ratepayers. It is a tradeoff for the increased cost of the waste collection service. Now the excess dollars that were being saved in the fund will go toward the increased cost of service plus a certain portion of the savings as well. The idea is for the Augmentation Fund to cushion the effect of the rate increase and allow the full impact to be spread over three years. Rates will be adjusted on an annual basis. This will be a transparent process; there will be no "smoke and mirrors."

TCV: What will the costs be with this plan?

Jones: They are going up. There will be an increase in December. The exact amount is unknown since we do not have the CPI (Consumer Price Index) adjustments at this time. When that is known, the disposal component - the part just agreed upon with BLT - of our rates will be determined. That will take effect July 1. I will have to figure out how much to increase our rates in January to cover that cost. The Augmentation Fund will take a bite out of the approximately 12% rate change of collection and disposal but we will have another 3% - 5% for inflation. We will be spreading our impact over the next three years. Our Augmentation Fund currently has $1.7 million. We will try to be prudent in how we use those funds so by the end of three years, when we have caught up to the actual rates, there will still be money left to handle unforeseen increases by other governmental agencies.

TCV: Will the Augmentation Fund disappear at some point?

Jones: We will probably keep a reserve whether we call it an Augmentation Fund or something else. Although the fund's primary purpose was to be a "shock absorber" allowing a rate ramp-up for this change, remaining reserve can absorb and soften the impact of an increased government fee or other adjustment.

TCV: Are there any other entities that Newark is obligated to pay?

Jones: Newark has a contract with BLT to pay for the garbage transfer at their site but we are not the actual payer. That billing goes to Waste Management. This is designed to be a transparent process so we will know exactly how much BLT is charging for the service. We just got our August bill for $206,000 that BLT will collect from Waste Management. This fee is a pass-through cost without any additional charges. Costs of waste removal are composed of collection, fixed costs, disposal and other fees (government, franchise, etc.). Instead of disposal costs going from $34 to $36 per ton in a typical year, they are going from $38 to $69.90. Disposal costs are driven by negotiations between Fremont and BLT which occur every two years. That will also happen this year.

TCV: Did Newark anticipate this large increase?

Jones: The good news is that we knew this was going to happen and prepared for it. However, we anticipated $64 per ton, the same rate as Fremont, so we figured that into the Augmentation Fund. The additional amount will increase the draw from the Augmentation Fund and ultimately ratepayers.

TCV: Is Waste Management still involved beyond pickup service?

Jones: Waste Management collects from the ratepayers of the City of Newark. Previously, they were a "one-stop" shop who handled all parts of the service. Now, they will collect funds used for collection and disposal even thought they are hauling waste to BLT who then transfers it to their own trucks and hauls it to a Waste Management facility. BLT will bill Waste Management for their cost including the disposal cost. Waste Management will then turn around and bill BLT for landfill costs. This will be an interesting paper trail.

TCV: What happens to those who used to haul their garbage directly to the landfill?

Jones: Everyone in the Tri-City area can haul directly to BLT. The rate structure is significantly different than it was at the landfill. At the landfill, the basic cost was pretty low ($15-$20). BLT has a $32 minimum which was negotiated directly between Fremont and BLT. We had no involvement or influence in that decision. The problem I see is that since the cost is high, some who would ordinarily take two bags of garbage to the landfill will find alternatives, some not so good, to get rid of their waste.

In Newark we have three bulk, multi-goods, pickups during the year as opposed to two in the other cities. We also have discount Waste Management coupons that can still be used at the Davis Street in San Leandro. Although this is a comparatively long drive, it is an option.

TCV: Are negotiations done jointly with Union City?

Jones: Our cities have a marvelous partnership with no hidden agendas. Our rates are negotiated as a single entity even though we do have slightly different internal processes. The established rate is for both agencies. They set rates in July while we do ours in December so there is a procedural difference and slightly different CPI factor. The contract was negotiated for 30 years.

This is a complex process but we have tried to keep it as transparent as possible to the ratepayer. The rates will go up, but they should increase in a manner that is as metered and controlled as possible with a continuation of good service.

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