WORKSHOP ITEM - Joe Huss, Finance Director
Title
PROPOSED 2021 SANITATION UTILITY FUND BUDGET
Background
As part of the City’s comprehensive budgeting process, staff will be presenting a preliminary budget for the City’s Sanitation Utility Fund.
The presentation will provide Council with the opportunity to review and comment on the proposed budget before it is presented to Council for formal adoption at a subsequent Council meeting.
The Sanitation Fund accounts for the city’s refuse and recycling program. January 1, 2016 marked the beginning of a new 5½ year contract with Walters Recycling and Refuse, Inc. to provide refuse collection and recycling services for all Blaine residents. The contract was extended in 2019 to cover the period through June 30, 2024.
Expenditures
The proposed budget for 2021 and the accompanying five-year model confront certain realities associated with the business of waste collection and disposal. The terms of the new contract with Walters directs that the basic monthly waste collection charges per household will increase by 37 cents. This increase, combined with the expectation that the customer base will increase by 250 households, results in budgeted expenses of $130,000 over 2020 projections. Because of the closure of the Great River Energy facility, collected waste continues to be hauled to a landfill for disposal. Tipping fees at the landfill are expected to increase $1.70 per ton. As a result, waste disposal expenses are budgeted to increase $50,000. The more volatile point in the model is in how recyclable material will be disposed, and how much it will cost. The 2020 model assumed a $50 per ton commodity fee, but the most recent fee charged is $36.40 per ton. The updated model assumes a 3% growth rate in the commodity fee, which translates to $37.60 per ton in 2021. The attached budget document proposes 2021 budgeted expenses of $4.66 million, or $188,000 greater than 2020 projections.
Revenues
Over 96% of the revenue required to operate the Sanitation fund comes from charges for service. Given the increases in expenses as described above, the rates charged to households will need to be increased for the 2021 budget year. Consistent with the five-year model presented to Council last year, staff is recommending increases to the city’s sanitation fees ranging from $1.25 to $2.00 per quarter, depending on container size. The budget as proposed will result in a projected $9,000 decrease in fund reserves.
Five-Year Outlook
The attached five-year model continues the schedule of increasing customer fees in 2022 through FY 2025. Fee adjustments ranging from $1.30 to $2.20 per quarter are built into the last four years of the model. While the fund balance at year’s end continues to be healthy, the actual cash/investment balance is nearly zero (negative). In order to cover the true cost of waste and recyclables disposal, as well as restoring the fund’s cash position, staff is recommending the schedule of fee adjustments built into the five-year model that follows on the next page.
Recommendation
Review the Proposed 2021 Sanitation Utility Fund Budget and provide further direction for adopting a final 2021 Budget.