CCRRA_SS_Recycling_and_COS_Study_FINAL_06-30-2016

CENTRE COUNTY RECYCLING AND REFUSE AUTHORITY SINGLE STREAM RECYCLING AND COST-OF-SERVICE STUDY FINAL REPORT JUNE 30, 2016 11875 High Tech Avenue, Suite 150, Orlando, FL www.mswconsultants.com (800) 679-9220 This report was delivered electronically If it is necessary to print hard copies, please so on post-consumer recycled paper and recycle TABLE OF CONTENTS GLOSSARY INTRODUCTION 1-1 1.1 1.2 1.3 Introduction 1-1 1.1.1 Background 1-1 1.1.2 Objectives 1-1 Recycling and Refuse System Overview 1-2 1.2.1 Recycling Collection 1-2 1.2.2 Transfer Station and Recycling Center 1-4 1.2.3 Other Services 1-5 Report Organization 1-6 FINANCIAL OVERVIEW 2-1 2.1 2.2 2.3 2.4 Introduction 2-1 Solid Waste Rate-Making Principles, Processes and Issues 2-1 2.2.1 Introduction 2-1 2.2.2 Rate Scenarios 2-1 2.2.3 Financial Management Goals 2-2 Rate Study Development 2-3 2.3.1 Financial Data 2-3 2.3.2 Capital Improvement Plan 2-5 Cost of Service Analysis 2-6 2.4.1 Departments 2-6 2.4.2 Net Revenue Requirement 2-6 2.4.3 Allocations 2-7 RATE RECOMMENDATIONS AND ALTERNATIVES 3-1 3.1 3.2 3.3 3.4 3.5 CCRRA Rate Structure REcommendations 3-1 Financial Projections 3-1 Uniform Rate Path Options 3-1 Recommended Rate Increases by Service 3-4 3.4.1 Recyclables Processing 3-4 3.4.2 Recycling Collection 3-4 3.4.3 Disposal and Other Fees 3-5 3.4.4 Impact of Grants on Future Rate Increases 3-5 3.4.5 Alternative Strategies 3-6 Conclusion 3-7 i TABLE OF CONTENTS SINGLE STREAM COLLECTION SYSTEM ANALYSIS 4-1 4.1 4.2 4.3 Collection System Overview 4-1 4.1.1 Routes and Crew Configuration 4-1 4.1.2 Customers 4-1 4.1.3 Current Rates 4-2 Single Stream Recycling Collection 4-3 4.2.1 Collection Vehicles and Productivity 4-3 4.2.2 Single Stream Customer Counts 4-5 4.2.3 Single Stream Recycling Gains 4-5 4.2.4 Converting Commercial Collection to Single Stream 4-6 4.2.5 Converting the Drop-off System to Single Stream 4-7 Single Stream Collection Impact Analysis 4-7 4.3.1 Methodology 4-7 4.3.2 Single Stream Routing Demand 4-8 4.3.3 Single Stream Collection Capital and Operating Costs 4-8 4.3.4 Net Cost and Rate Impact of Converting to Single Stream Collection 4-9 SINGLE STREAM PROCESSING ANALYSIS 5-1 5.1 5.2 5.3 5.4 Current Facility Overview 5-1 5.1.1 Facility Description 5-1 5.1.2 Throughput 5-1 5.1.3 Processing Costs 5-1 Single Stream Processing Needs 5-3 5.2.1 Quantity Requiring Processing 5-3 5.2.2 Single Stream Processing System Parameters 5-4 5.2.3 Obtaining Capital and Operating Cost Estimates 5-5 5.2.4 Detailed Single Stream Process Flow 5-5 5.2.5 Financial Analysis of SSR Processing 5-8 Third Party Single Stream Processing 5-9 5.3.1 Overview 5-9 5.3.2 O&M Savings at Centre County MRF 5-10 5.3.3 SSR Transportation Cost 5-10 5.3.4 Lycoming County Revenue Share 5-11 Summary 5-11 ANALYSIS OF SINGLE STREAM ALTERNATIVES 6-1 6.1 6.2 6.3 6.4 Overview of Alternatives 6-1 Financial Impacts of Single Stream Alternatives 6-1 Rate Impacts of Single Stream Alternatives 6-2 Summary 6-2 ii CCRRA TABLE OF CONTENTS CONCLUSIONS AND RECOMMENDATIONS 7-1 7.1 7.2 Cost and Rate Study 7-1 Single Stream Recycling 7-2 FINANCIAL MODEL EXHIBITS LIST OF APPENDICES Appendix A – Single Stream MRF Process Diagrams, CP Manufacturing Appendix B – Single Stream MRF Process Diagrams, Machinex Appendix C – Working Meeting Presentation List of Figures Figure 1-1 Figure 1-2 Figure 4-1 Figure 4-2 Figure 5-1 Recycling Collection Services Provided by the Authority 1-3 Recycling Center Photographs 1-4 Single Stream Collection Vehicles 4-3 Other Vehicles Needed for Single Stream Collection 4-4 Photograph of a Load of Single Stream Recyclables 5-3 List of Tables Table 1-1 Recycling Quantities Collected by the Authority 1-2 Table 1-2 Materials Managed by CCRRA (Tons) 1-5 Table 2-1 Endowment Fund Targets and Annual Contributions 2-2 Table 2-2 Projected Grant Revenue 2-3 Table 2-3 Historical Operating Results 2-4 Table 2-4 Estimated Basis of Operating Reserve Starting Balance, FY16 2-4 Table 2-5 Remaining Loan Payments 2-4 Table 2-6 CIP Asset Categories 2-5 Table 2-7 Capital Replacement Schedule ($1,000) 2-5 Table 2-8 Departments 2-6 Table 2-9 Allocated Net Revenue Requirement and Full Cost Rates (“System” and “Drop-off” Allocated to “Transfer”) 2-8 Table 2-10 Allocated Net Revenue Requirement and Full Cost Rates (“System” and “Drop off” Allocated to All Services) 2-9 Table 3-1 Rate Path Options (Uniform Rate Adjustments) 3-2 Table 3-2 Selected Rates, Just-in-Time Rate Path with Uniform Rate Increases 3-2 Table 3-3 Selected Rates, 3-Year Step Rate Path with Uniform Rate Increases 3-3 Table 3-4 Selected Rates, Programmatic Rate Path with Uniform Rate Increases 3-3 Table 3-5 Processing Rate Increases ($/ton) 3-4 Table 3-6 Collection Rate Increases ($/month) 3-5 CCRRA iii TABLE OF CONTENTS Table 3-7 Transfer Station Rate Increases ($/ton) 3-5 Table 3-8 Selected Rates, Just-in-Time Rate Path with Grant Funding Maintained 3-6 Table 4-1 Current Recycling Collection Route Summary by Day of the Week 4-1 Table 4-2 Residential Customers 4-1 Table 4-3 Commercial Customers and Drop-off Locations 4-2 Table 4-4 Collection Rates (2016) 4-2 Table 4-5 Comparison of Productivity Metrics 4-4 Table 4-6 Possible Service Delivery Changes [1] 4-5 Table 4-7 Potential Increase in Residential Diversion Attributable to Single Stream 4-6 Table 4-8 Value of Incremental Recyclables 4-6 Table 4-9 Residential Curbside Single Stream Recycling Daily Route Demand 4-8 Table 4-10 Comparison of Total Routes 4-8 Table 4-11 Capital Costs: Status Quo vs Single Stream 4-9 Table 4-12 O&M Costs: Status Quo vs Single Stream 4-9 Table 4-13 Net Annualized Collection Cost: Status Quo vs Single Stream 4-10 Table 4-14 Single Stream Curbside Collection Rate Impacts 4-10 Table 5-1 Analysis of Processing Cost, Material Revenues and Grants (13,500 tons) 5-2 Table 5-2 Current Facility Labor Needs 5-4 Table 5-3 SSR System Capital Costs 5-8 Table 5-4 Current Facility Labor Needs 5-9 Table 5-5 MRF Labor Needs for SSR Transfer Operation 5-10 Table 5-6 Material Revenue Summary with Average Commodity Value and Revenue Share 5-11 Table 6-1 Summary of Alternatives 6-1 Table 6-2 Financial Impact of Alternatives 6-1 Table 6-3 Selected Rate Impacts of Alternatives 6-2 iv CCRRA GLOSSARY OF FINANCIAL TERMS Capital Improvement Plan (CIP): A list of future capital purchases (including facilities, equipment and vehicles) showing the expected purchase date, future cost, and expected useful life of each purchase Full Cost of Service: The sum of the direct operating cost, loan/debt servicing, and annualized future cost of capital replacement to operate a particular facility or provide a particular collection or other service Full-Cost Rate: A rate that recoups the Full Cost of Service for any particular facility operation or collection service Gross Revenue Requirement: Sum of the direct operating cost, loan/debt servicing, and annualized future capital replacement needs for the entire organization to provide its services Just-in-Time Rate Increase (Just-in-Time Rate Path): A rate increase that exactly meets revenue sufficiency each year of the Planning Period Material Revenue: Revenue earned on the sale of materials collected for purposes of recycling Net Revenue Requirements: The Gross Revenue Requirement less revenues that not come from rate payers Non-rate revenues include revenues from such things as certain miscellaneous fees, charges and penalties; grants; Material Revenue; interest earnings; and leases Planning Period: For this study, fiscal years ending December 31, 2016 through 2025 Programmatic Rate Increase (Programmatic Rate Path): A regularly scheduled annual rate increase that is equal (or varies only slightly) from year to year Rate Configuration/Rate Structure: customers for the services provided The combination of all rates needed to adequately charge Rate Path: The planned changes to all rates over the Planning Period Revenue-Sufficient: Generating revenue from all sources within an annual period such that Full Cost of Service in the same annual period is covered Step Rate Increase (Step Rate Path): A rate increase that occurs at regular intervals of two years or longer, such that there are no increases in the interim years Uniform Rate Increase (Uniform Rate Path): For any organization with multiple different rates and services, a percentage increase that is applied equally to each rate CCRRA GLOSSARY OF FINANCIAL TERMS This page intentionally left blank CCRRA 1.1 INTRODUCTION INTRODUCTION 1.1.1 BACKGROUND The Centre County Recycling & Refuse Authority (Authority) provides recycling collection and processing to over 25,800 households and almost 900 commercial establishments throughout the County The Authority also owns and operates a solid waste transfer station that receives most of the waste generated in the County, roughly 95,000 tons of refuse plus a variety of other materials over the past several years A small volume of additional wastes generated in Centre County are direct hauled to two out-of-county landfills The Authority’s recycling system is predicated on source-separated collection of recyclables The Authority collects recyclables from both residential and commercial customers, and also receives recyclables from multiple third party collectors, including a number of streams from Penn State University With source-separated collection as the norm, the Authority’s material recovery facility (MRF) performs sorting primarily on metal cans and plastic bottles, with other materials offloaded and stored directly in bunkers until ready for baling (if necessary) and shipment As a result of this system, the Authority has been able to limit contamination rates to below two percent, and has been successfully selling its recovered materials – including color-sorted glass bottles – for many years Nonetheless, with the national trend towards single stream recycling, the Authority is among the final holdouts among local governments nationally still managing a curb sort system At the time of the project, the Authority’s recycling collection fleet was nearing the end of its useful life and the Authority was considering whether to continue with the curb sort system or to convert to a single stream system Such a change would require coordinated modification of both its collection fleet and its MRF to collect and process single stream recyclables On a related matter, Centre County has responsibly managed its capital and operating budget and at the current time is in sound financial condition However, the Authority’s rate structure has not been independently evaluated for over 20 years Further, a number of grant funding sources that have been historically available are scheduled to sunset in the next five years Therefore, in parallel with an analysis of single stream recycling, the Authority sought assistance developing an updated full-cost financial analysis to validate and refine its capital improvement program details and validate, or recommend adjustments to, its rates 1.1.2 OBJECTIVES The Authority retained the Project Team of MSW Consultants to evaluate the operational and financial impacts of converting its collection system and MRF to accommodate single stream recyclables This study had the following objectives:  Document the operational and financial impacts of converting from the current curb-sort collection system to a single stream collection system;  Document the operational and financial impacts of developing single stream recycling processing capacity, specifically comparing two alternatives for processing:  Retrofitting the Authority’s MRF with a single stream processing line sized to accommodate the current recycled material stream with room for future growth  Modify the existing MRF to serve as a transfer station for trailer haul of single stream recyclables to a third-party processor accepting single stream recyclables CCRRA 1-1 INTRODUCTION  Calculating the combined impacts of single stream collection and single stream processing scenarios to determine the overall economic and diversion profile of a single stream system compared to the status quo In parallel with the above objectives, MSW Consultants teamed with Willdan Financial Services (Willdan) to prepare a financial model to compile and project the financial performance of the Authority’s system, and to identify potential rate adjustments that may be needed in the future The financial model organizes Authority-provided historical data on expenses, revenues, customers, material quantities and projects future escalation of these inputs for use in evaluating a 10-year rate path 1.2 RECYCLING AND REFUSE SYSTEM OVERVIEW The Authority oversees a solid waste management system that includes disposal, recycling collection, and recycling processing functions, as well as several other ancillary services Components of the system are summarized below 1.2.1 RECYCLING COLLECTION The Authority collects recyclables from over 25,800 residential and almost 900 commercial customers across the County The Authority offers the following collection services:  Residential Curbside Collection: Working for local governments and private haulers, the Authority provides curb-sort collection using a multi-compartment truck/trailer combination to collect recyclables set out in bins  Commercial Recycling Collection: The Authority also provides source-separated commercial collection of carted recyclables using commercial multi-compartment collection vehicles  Old Corrugated Cardboard (OCC) Collection: The Authority collects clean OCC from commercial and institutional generators via frontload collection truck  Drop-off Recycling: Finally, the Authority uses a single axle roll-off system to collect recyclables from approximately 60 drop-off locations outfitted with multi-compartment containers This system serves the subset of Centre County’s population that does not have access to curbside collection Figure 1-1 on the following page provides photographs of the Authority’s collection services Table 1-1 summarizes the quantity of materials collected from each set of customers over the past four years Table 1-1 Recycling Quantities Collected by the Authority Collection Service 2012 2013 2014 2015 Residential Curbside 4,371 4,294 4,218 4,224 Commercial Source-Separated 1,690 1,664 1,663 1,690 Frontload OCC 456 537 674 736 Drop-off Locations 2,236 2,193 2,204 2,209 Total 8,753 8,689 8,758 8,858 Given widely documented changes to the composition of the waste stream – especially the reduction in printed papers and light weighting of packaging – it is projected that recycled material quantities collected by the Authority will experience slow growth in line with overall growth in the County’s population.1 The Authority may have opportunities from time to time to receive incrementally more recyclables from out-of-county generators 1-2 CCRRA 2/17/2016 Single Stream Processing Overview 10 What does “Single Stream” look like? 11 Steps to Process Single Stream Recyclables 12 Metering and Infeed Pre-sort OCC Screen (& ONP Screen) Coarse Glass Removal Fiber Sort Polishing Screen(s) Container Sorts      Glass: Final Breakage & Removal Plastics: Optical Sorter Plastics: Manual Sort Steel: Cross Belt Magnet Aluminum: Eddy Current 2/17/2016 Single Stream MRF Mass Balance and Material Composition Audit 13 Metering and Infeed 14 Pre-sort Contamination Removal 15  Remove bulky items  Remove plastic films and other contaminants  Remove or open bagged materials 2/17/2016 OCC Screen 16 Glass Removal 17 Glass in the Current System 18 2/17/2016 Fiber Sort 19 Container Sorting 20  Optical sorter for single or multiple resins  Typically adjusted for PET removal  Other containers pass through     HDPE natural: manual sort HDPE pigmented: manual sort Steel Cans: magnet Aluminum Cans: eddy current What’s in YOUR bales? 21 2/17/2016 Generic Single Stream MRF (High Vol) 22 Generic Single Stream MRF (Lower Vol) 23 Single Stream MRF for CCRRA 24 Assumptions Capacity Needs  12,000 tons annually  Include OCC screen  But allow direct bale for clean loads  Shifts per day: 48 tons per day  250 operating days per tons per hour year   days/week Less holidays 2/17/2016 Recovered Material Value Current System Material Single Stream System 25 Value ($/ton) – Jun 2015 Aluminum Material $1,334 Brown Glass $3.00 Clear Glass $35.00 Green Glass $5.00 Value ($/ton) – Jun 2015 Aluminum $1,334 Mixed Cullet ?? HDPE Natural $680.00 HDPE Natural $680.00 HDPE Pigmented $520.00 HDPE Pigmented $520.00 Mixed Plastic $145.00 Mixed Plastic Newspaper ?? $30.00 OCC $87.82 Bedding $70.00 Mixed Paper OCC $37.70 $87.82 Mixed Paper PET $247.50 PET Steel $145.54 Steel $37.70 $247.50 $145.54 Residue ($67.00) Recycling Collection System 26 Collection Services Provided 27 Service No of Customers Residential Curbside Commercial OCC Quantity (annual tons) Notes 22,030 4,299 7.5 lbs/HH/week 109 527 4.8 tons/cust/year Commercial Containers 50 1,662 33.2 tons/cust/year Drop-off 61 2,220 36.4 tons/site/year 22,250 8,707 Total Curbside Service Contracts • State College Borough • Centre Region COG • Bellefonte 2/17/2016 Curbside Recycling Collection 28  Manual collection  Six compartment truck and trailer  Single bin set-outs  Curbsort by 2-person crew  Set-outs tracked    State College: 67% Centre Region COG: 61% Bellefonte: 53% Drop-off Collection 29  One to compartments  Scheduled and on-call collection  roll-off routes on Monday, or rest of week  Swap out empty containers  2-container trailer for distant sites to reduce drive time Commercial OCC Collection 30  Frontload  route per day  routes on Thu  routes on Fri  6-yd or 8-yd containers  Load cell on Frontloader forks to weigh containers  Track weight by customer  Broken lids add water weight  Low routing density 10 2/17/2016 Commercial Collection – Bottles/Cans 31  Sideload compartmentalized recycling truck  Cart system   65 or 95 gallon Provided by CCRRA  commodity in each cart  Demands space at client location  Low routing density Routes 32 System Mon Tue Wed Thu Fri Sat Residential Recycling 11 10 10 Commercial OCC 1 or Commercial Recycling 2 Drop-off Recycling Total 2 14 15 16 15 12 Avg 9.2 1.1 0.25 1.5 0.25 13.8 2.0 Discussion: • Daily Route Balance Automated Collection of Single Stream 33 Automated Sideloader (ASL) Automated Frontloader (AFL) 11 2/17/2016 Curbside Collection Technology Comparison 34 Metric Households Served/Day Length of Work Day Truck Capacity Crew Size Out of Cart Set-outs Fleet Standardization O&M Cost Curb Sort System Single Stream Automated Side Load Single Stream Automated Front Load 500 800-1,000 800-1,000 4-7 hours 7.5 hours 7.5 hours tons 5-6 tons 5-6 tons 1 N/A Difficult Manageable Low: Single Use Medium: Residential recycling and trash High: Residential and commercial Low-Med High Med-High When we model alternatives, need to determine what productivity rate and length of work day • Industry standard or CCRRA-specific Financial Model Update 35 Status  Prepare base case financial model  Determine system revenue requirements under existing operational configuration Operating and maintenance expenses Non-operating expenses  Reserve requirements  Capital expenditures    Assess sufficiency of revenues under existing rates 12 2/17/2016 Historical Operating Results Description Operating Revenues Operating Expenses Pct Change 2010 2011 2012 2013 2014 $9,393,320 $9,908,634 $9,366,645 $9,730,271 $9,579,740 0.49% -0.38% 9,789,683 10,238,604 9,912,684 9,415,022 9,642,415 Operating Income (Loss) ($396,363) ($329,970) ($546,039) $315,249 ($62,675) Non-Operating Revenues (Expenses) $290,384 $366,342 $312,255 $326,515 $574,814 18.61% Transfers and Capital Contributions $218,206 $- $- $- $- NA $36,372 ($233,784) $512,139 46.16% Net Income (Loss) $112,227 $641,764 Add Back Depreciation $831,079 $824,433 $720,732 $720,689 $798,146 Adjusted Net Income (Loss) $943,306 $860,805 $486,948 $1,362,453 $1,310,285 8.56% * Information taken from audited financial statements System Revenues Description Budgeted 2015 2014 Pct Change Operating Revenues: Tipping Fees Recycling Fees $6,753,823 $6,546,421 2,942,785 3,046,921 11,400 11,400 0.0% $9,708,008 $9,604,742 -1.1% $405,000 $1,050,245 159.3% 27,800 27,800 0.0% 3,250 3,250 - - 0.0% $436,050 $1,081,295 148.0% 10,144,058 10,686,037 5.3% Other Total Operating Revenues -3.1% 3.5% Non-Operating Revenues Operating Grants Other Income Interest Income Gain on disposal of capital asset Total Non-Operating Revenues Total Revenues 0.0% * Information taken from unaudited reports; will be reconciled with audited statements System Expenses Description 2014 Budgeted 2015 Pct Change Landfill Costs $2,111,168 $2,089,827 Trucking Costs 1,414,013 1,381,010 -2.33% 45,852 36,100 -21.27% Cost of Sales Labor Costs -1.01% 3,761,629 3,885,601 3.30% Utilities Costs 81,400 102,500 25.92% Insurance Costs 118,401 127,946 8.06% 81.70% Professional Services Costs 117,500 213,500 Maintenance Costs 553,875 627,400 Office Expense 105,600 119,700 13.35% 1,342,916 1,600,721 19.20% $9,652,354 $10,184,305 5.51% Other Expenses Total Expenses 13.27% * Information taken from unaudited reports; will be reconciled with audited statements 13 2/17/2016 Vehicle Replacement Plan Year Amount 2016 $ 64,105 2017 995,505 2018 1,194,750 2019 693,173 2020 745,490 2021 1,286,922 2022 928,685 2023 392,712 2024 84,414 2025 1,310,890 Ten Year Total $ 7,696,646 Base-Line Financial Model  Dynamic financial model will allow MSW and the Authority to quickly evaluate alternative scenarios based on their impact to fiscal condition of the system Financial Model Elements (1 of 4) 42 Revenue Sufficiency Analysis Data: • • • • • • • Beginning Balances Operating Revenue / Expenses Capital Improvement Plan Outstanding Debt Management goals / policies Reserve Requirements Rate of Return Analysis: Development of financial plan which ensures adequate revenue to fund operating / capital expenses, maintain debt service coverage, maintain sufficient fund balances 14 2/17/2016 Financial Model Elements (2 of 4) 43 Cost of Service Analysis Data: • • • • Analysis: Operating Revenue / Expenses Capital Improvement Plan System / Operating Metrics Customer billing data Development of analysis which assigns net costs to functional / customer cost components to ensure equity among customer classes Cost-of-Service Functions 44  Tier      Tier - Collection Transfer Station Operations Transportation & Disposal Recycling Collection MRF Operations     Residential curbside Drop-off Commercial OCC Commercial containers Financial Model Elements (3 of 4) 45 Rate Design Analysis Data: Analysis: • Revenue requirements from Revenue Sufficiency /Cost of Service Analyses • Customer billing data Development of analysis which assigns rates and charges to customers based on their usage / benefit characteristics 15 2/17/2016 Financial Model Elements (4 of 4) 46 Alternatives Analysis Data: Analysis: • Revenue requirements from Revenue Sufficiency /Cost of Service Analyses • Single Stream collection system alternatives analysis • Single Stream MRF alternatives analysis Development of analysis which compares full costs of the status quo with various alternatives to assess impact on revenue sufficiency and rates Summary 47 Single Stream System Alternatives 48 Options Residential & Drop-off Commercial Separate Commercial Single Stream Option Single Stream OCC Mixed Paper + Containers Option Single Stream OCC + Mixed Paper (combined) Containers Option Single Stream None OCC, Fiber & Containers Processing Options • New MRF • Retrofit existing facility • Procure processing and transport 16 2/17/2016 Next Steps 49 August September  Finish Baseline of  Financial Model Current System     Analysis of Alternatives Recyclables Processing Facility Collection System Financial Data Assembly   Collection Processing October  Reporting Questions 50 Walt Davenport, President 301/607-6428 wdavenport@mswconsultants.com John Culbertson, Principal 407/380-8951 jculbertson@mswconsultants.com 17 This page intentionally left blank CCRRA