Administration - Alison Bong, Deputy Finance Director
Title
Title
Adopt the 2023 Sanitation Fund Budget
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Executive Summary
Pursuant to requirements to adopt annual budgets for all operating funds, Staff is bringing forward the proposed 2023 Sanitation Fund Budget for Council consideration and adoption.
Background
Council reviewed the proposed 2023 Sanitation Utility Fund Budget at the September 7, 2022 Workshop during which Council stated support for the budget as presented. Council provided staff direction to bring forward the budget and rates as recommended during workshop.
The Sanitation Fund accounts for the city’s refuse and recycling program. Walters Recycling and Refuse, Inc. provides refuse collection and recycling services for all Blaine residents. The current contract term, extended in 2019, is from January 1, 2016 through June 30, 2024.
Revenues
Over 96% of the revenue required to operate the Sanitation fund comes from charges for trash and recycling services. The quarterly rate charged to households will increase by $1.50 ($0.50/month) for all container sizes in the budget year 2023.
Activity in this fund in recent years has resulted in an operating surplus of $240,000 in 2021 and a projected operating surplus of $527,000 in 2022. The primary reason for these surpluses is that, rather than paying for the disposal of our recyclables, as was the practice the past couple of years, the city now earns credits for the sale of recyclable material. More information on this topic is provided in the Expenditures section below. Despite these recent increases in fund balance, cash reserves fall below the targeted level equal to three months of operating expenditures. Staff recommends a rate increase of $1.50 per quarter for all container sizes in 2023. Gradual increases to container charges are built into this model beginning in 2024 to build cash reserves to the necessary level. The budget, as proposed, would result in a projected $138,000 increase in cash reserves by year-end 2023.
Expenditures
Expenditures related to the handling of waste and recyclables within the Refuse Fund can be broken down into two parts: the cost of the collection and the cost of disposal of that material. Both are relatively straightforward. The proposed 2023 budget and the accompanying five-year plan include a 39-cent increase in the monthly waste and recycling collection charges per household. These charges are applied to a customer base projected to increase by 250 households annually.
Expenditures for the disposal of material can be divided between waste and recyclables. Tipping fees at the landfill are expected to increase by $1.75 per ton for each model year, consistent with recent actual charges.
The cost associated with recyclables experiences greater volatility. In 2019 and 2020, the city paid between $30-50 per ton to process recyclables. In 2022, the city received a monthly credit averaging $72 per ton. The updated model assumes a net cost of zero per ton for recyclables throughout the five years. The recycling commodity market was strong during the first half of 2022 but has recently experienced increased resistance. This has resulted in a smaller credit being received for recycling commodities. This trend is forecast to continue into 2023.
Other budgeted expenditures cover the cost of marketing and professional services designed to encourage recycling, operation of the organics recycling program, billing fees, and chargebacks to the General Fund for administrative support.
The attached budget document proposes 2023 budgeted expenditures of $4.92 million: a $120,100 (2.5%) increase over the 2022 budget.
Five-Year Outlook
The attached five-year model continues the increase in customer fees in 2023 through FY 2027 to maintain a healthy fund balance. The model shows an annual increase of $1.50 in 2023 through 2026 and a $2.25 increase in 2027. Utility bills are issued quarterly. While the year-end fund balance remains healthy throughout the model, the actual cash/investment balance is nearly zero. To cover the actual cost of waste and recyclables disposal, as well as restore the fund’s cash position, staff is recommending following the schedule of fee adjustments built into the five-year model:
|
Service |
2022 |
2023 |
|
32 Gallon |
$40.50/QTR |
$42.00/QTR |
|
64 Gallon |
$51.00/QTR |
$52.50/QTR |
|
96 Gallon |
$64.50/QTR |
$66.00/QTR |
Strategic Plan Relationship
The adoption of annual budgets contributes to the overall financial stability of the City.
Board/Commission Review
N/A
Financial Impact
The proposed budget, if adopted, will increase the quarterly rate for all refuse container sizes by $1.50 and will result in $4,921,140 in projected revenues and a $201,544 increase in projected fund balance.
Public Outreach/Input
N/A
Staff Recommendation
Approve the 2023 Sanitation Fund Budget through the adoption of the following resolution.
Attachment List
N/A
Body
WHEREAS, the proposed Sanitation Utility Enterprise Fund Budget for the fiscal year commencing January 1, 2023 has been prepared by the City Manager; and
WHEREAS, the City Council has examined, studied, and reviewed said proposed Sanitation Utility Enterprise Fund Budget; and
WHEREAS, the City Council has, after due consideration and deliberation, made such amendments and adjustments in the proposed Sanitation Utility Enterprise Fund Budget as they consider necessary, desirable, or expedient.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Blaine as follows:
1. That the proposed Budget for the Sanitation Utility Fund attached hereto is approved.
2. That the 2023 appropriations attached hereto are approved.
3. That the 2023 funding sources and fee adjustments identified and attached hereto and reflected in the City’s fee schedule are approved.
That the City Manager is authorized and directed to implement and administer, within the budgetary funding limits and within adopted City policy and relevant State and City laws and regulations, said approved Sanitation Utility Enterprise Fund Budget.
PASSED by the City Council of the City of Blaine on this 7th day of November, 2022.