Andrew Thompson, CGFO
Director, Financial Services

Rhea Rivera, CGFM
Assistant Director, Financial Services

Issue Statement: A preliminary residential solid waste assessment rate must be adopted by the Commission to be provided to the County Property Appraiser by August 2, 2019.

Recommended Action: The City Commission adopt a preliminary FY 20 residential solid waste assessment rate and the time, date and place for a public hearing in regard to the adoption of the final FY 20 residential solid waste assessment rate. Staff recommends a rate of $227 per residential unit, an increase of $10 over FY 19, but still well below FY 13 rate of $255.

The City Commission established a Solid Waste Collection and Recycling Services Assessment Program in FY 06. This program applied initially to residences in the areas annexed in 2005 – North Andrews Gardens, Twin Lakes South and the Sartori Area. Prior to annexation these residents had been charged by the County for this service with a non-ad valorem assessment on their annual property tax bills, and the City chose to continue this practice. Under Ordinance O-2005-024, adopted in 2005, the City implemented a residential assessment for all residences within the annexed area receiving solid waste cart service which were composed of one to four dwelling units. Residential units composed of more than four dwelling units are considered to be commercial accounts and were billed monthly at commercial rates rather than receive an annual assessment.

In 2010, staff proposed that the residential solid waste assessment concept be expanded to the remainder of the City. The City Commission approved this recommendation and provided direction to proceed with the expansion of this program. Consequently, for FY 11 and going forward the program was expanded to all residences citywide having less than five dwelling units.  The ordinance establishing this program requires a preliminary rate resolution and an annual rate resolution be adopted during the budget process each fiscal year. This agenda item is for the preliminary rate resolution.

In fiscal year 2014, the annual residential solid waste cart service assessment rate was reduced from $255 per residence to $205, a reduction of 19.6%.  Similar reductions were made for commercial accounts, which are billed monthly by the City rather than through an assessment. 

In 2016, Commission approved a comprehensive review of the City's solid waste operations, including an analysis of service rates charged to residents and commercial customers.  In the presentation and the study, Kessler Consulting recommended the City consider potential operational changes to reduce expenses in addition to commercial and residential rate adjustments to maintain a healthy and self-sustaining Solid Waste Fund.  As part of the study,  the firm performed a number of rate scenario forecasts.  These projections demonstrate that the major reductions to the rate structure in 2014 are not sustainable into the near-future and that the fund would exhaust reserves almost completely by 2021.  Following the recommendations made in the study, the residential solid waste cart service assessment rate was adjusted to $217 in FY18. 

The ordinance establishing this program requires a preliminary rate resolution and an annual rate resolution be adopted during the budget process each fiscal year. This agenda item is for the preliminary rate resolution. 

For FY 20, it is recommended that the residential solid waste cart service assessment rate be increased to $227  The proposed rate of $227 remains well-below the previous assessment rate of $255 in FY13 & prior years.  

Over the past year however, the sales value of recyclables have continued to decline due a shrinking market for recycled materials and high contamination rates.  These factors have greatly increased the net cost of recycling.  The net cost of recycling has grown from $12.46 per ton in October 2018 to $55.27 per ton this May, an increase of more than 300%.  

The City's solid waste rates remain well below 2013 levels ($255 per residential unit) even as operating costs for the solid waste fund increase.    Over the past year however, the sales value of recyclables have continued to decline due a shrinking market for recycled materials and high contamination rates.  These factors have greatly increased the net cost of recycling.  The net cost of recycling has grown from $12.46 per ton in October 2018 to $55.27 per ton this May, an increase of more than 300%.   These increasing recycling costs place an additional burden on the solid waste.  Oakland Park is dedicated to sustainability and the Commission has consistently voiced their support of maintaining a vigorous recycling program.  To maintain the existing recycling program, a $10 increase in the special assessment rate for residential (an increase from $217 to $227 per residential unit per year) is recommended.  The rate still remains $28 lower than the earlier 2013 rate.

The foregoing rate will be reviewed for sustainability in the ensuing years and adjustments will be recommended in the future as needed. 

The proposed rate will appear on the TRIM notice mailed to all property owners in August. There will be a hearing in regard to the final adoption of this rate on September 12, 2019 to establish the final rate that will appear on the property tax bill mailed to all property owners at the beginning of November. At the time of the final hearing, a lower rate may be adopted by the Commission if it so choses, but a higher rate can be adopted at that time only with significant effort and expense.

The recommended assessment rate for residential cart service of $227  is expected to generate $2.4 million.  The increased rate generates approximately $0.1 million, which is used to offset the increased recycling costs.

It should be noted that the proposed rate is predicated on recent costs and trends.  Solid waste costs are highly driven by three main factors: vehicle replacement, personnel costs, and disposal fees.  Vehicle replacements are planned many years in advance,  but changes to disposal fees can be subject to larger market forces, such as the decline in demand for recycling goods.  Likewise, personnel costs are affected by changes in pension costs, the insurance market, and collective bargaining.  Future adjustments to the residential assessment rate may be needed in the future to accommodate changes in existing trends and to maintain existing service levels.