CC - Agendas - City Council - REGULAR - 8/14/2018

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9.H.a City of Prescott, Arizona Solid Waste Utility Rate Study TASK 4 Allocate and Project the Revenue Requirement Based on the information we collect, we will project the City's revenue requirement as well as the fund balance for the City's enterprise fund over a 10-year planning horizon. We will determine the revenue requirement for the current year by annualizing the City's fiscal year-to-date cash expenditures. We will project revenue requirements for future years by applying anticipated changes in the City's expenditures to the current revenue requirement. We will allocate the revenue requirement for the collection operations among the City's residential, commercial, and transfer station operations. We will then compare the revenue requirement for each customer sector with their respective revenues at the current rates. This will enable us to determine the extent to which rate equity exists among customer sectors. Additionally, it will provide us with a target revenue amount for use in designing new collection rates. TASK 5 Design New Rates For Various Rate -Making Scenarios We will design tipping fees and rates with a mind toward the rate -making objectives we discussed with City staff at our kickoff meeting. In designing rates, our analysis will include, but not be limited to, the following issues. We will develop up to three scenarios for each of the issues we analyze. • Variable (or pay -as -you -throw) rates for single family customers: If the City is interested in offering more choices to single family customers, we may design single family pay -as -you -throw (PAYT) rates. If the City decides it wants to transition to variable rates, we will discuss with the City two different approaches: the cost -based approach, and the incentive -based approach. The cost -based approach entails designing rates that more closely reflect the incremental cost of service among the various sizes of refuse carts. The incentive -based approach is more focused on providing an economic incentive for customers to recycle. • Commercial rates that reward customers for having multiple containers rather than multiple pickups: A solid waste enterprise will incur greater cost to collect one bin twice per week than to collect two side -by - side bins once per week. We will design commercial rates to reflect this dynamic in the cost of commercial refuse collection. As a result, the City's rates will better reflect the true cost of service and be more competitive in relation to the rates of private haulers. • Tipping fees that reflect the true value of the City's solid waste facility: The internal tipping fee that the City uses to allocate costs between its transfer station and its collection operations should be equal to the market rate for tipping fee service. For example, if the City's market tipping fee charged to private haulers and third parties is $63.00 per ton, the City should use that same tip fee to allocate cost between its transfer station and its collection operations. This transfer pricing policy will lead the City to make better economic decisions for the enterprise fund as a whole. • Special billing arrangements for the downtown area: We will assist the City in designing service and billing arrangements that minimize refuse truck traffic in the downtown area, and equitably allocate collection costs among downtown businesses. • An administrative fee for customers with shared bins that reflects the additional administrative cost: We may design an administrative fee to be applied to customers with shared bins. This fee would recoup the City's added administrative cost for customers with shared bins. It would also provide an appropriate pricing signal to customers and property managers that may incentivize them to opt for a single invoice. Attachment: Raftelis Scope of Work -Prescott DIF and Rate Study (2124 : Rate & Fee Study Contract with Raftelis) Solid Waste Rate Study - Attachment Page 4 Packet Pg. 262