Tuesday, May 12, 2020

Napa County Grand Jury analyzes the city's plan for 3 years of rate hikes

Last year’s hefty hike in Napa garbage service rates caught the eye of the Napa County Grand Jury, which launched an investigation.
The Grand Jury released its report last week, concluding the rate increases were “justified and timely,” with the caveat that the city could have communicated more transparently with residents about the department’s finances.
City Council approved a garbage price hike in July that raised the price by 36% incrementally over three and a half years for the roughly 23,000 residential and commercial customers who receive curbside pickup. It’s intended to address a $3.3 million shortfall in the 2020 Solid Waste and Recycling program’s budget.
The first scheduled increase of 12% went into effect on August 1. An additional 10% increase followed on Jan. 1 of this year, to be followed by annual increases of 8% and 6% on the first day of the year in 2021 and 2022, respectively.
These rates, the investigation found, are consistent with 25 neighboring cities.
As part of its investigation, the Grand Jury visited the southern Napa County facilities, spoke with a number of city and county officials involved in the program and reviewed documents relating to the budget and laws governing waste collection.
Napa pays a private company, Napa Recycling and Waste Services, to handle its garbage. The current service contract goes through 2031, and it includes a goal of diverting 75% of recyclable materials away from the landfill. The city’s currently diverting about 68%, which is already higher than many communities, according to Kevin Miller, Napa’s recycling manager.
According to the report, the working relationship between the Utilities Department, which oversees the Solid Waste and Recycling Division, and Napa Recycling and Waste Services is “cooperative and cost-effective,” as demonstrated by the contract extension.
The process goes like this: the company collects curbside waste from customers; recyclables are transported to a sorting facility on Devlin Road in southern Napa and trash is taken to a transfer station next door. Recyclables are then sorted and processed for distribution on global markets while the trash is brought to the landfill in Suisun City.
Napa doesn’t own the landfill, so it pays an estimated $3.4 million annually for its use. The city owns the two facilities in southern Napa, but both are managed by the private contractor, which also owns and maintains the fleet of 28 garbage trucks and employs 70 personnel. Residents are billed by Napa Recycling and Waste Service, and that money, along with gate fees from other users who pay for access to the two city-owned locations, goes into an Enterprise Fund separate from taxpayer dollars managed by the Utilities Department to pay for the waste program.
In an interview, Miller describes the Enterprise Fund “as a business,” which means it has to react to market realities.
The $3.3 million budget shortfall mentioned above comes from an imbalance in revenues and expenditures in Napa’s Solid Waste and Recycling Program. It estimated a $1.2 million decline in revenues due to the decrease in cost per ton of recyclable materials, a significant percentage of which have been sold to China.
“We don’t control that, that’s literally a global marketplace, and COVID-19 hasn’t helped. Our stance is we manage our funds and do whatever we can in response to changing circumstances,” Miller said.
The department also budgeted a $2.1 million annual increase in the program’s expenditures because the contract extension it signed with the contractor provided for overdue replacement of collection trucks, an improved sorting process at the diversion facility and facility upgrades to comply with new state environmental mandates.
When council made the decision last year to unanimously approve rate hikes, the budget for the current fiscal year included $21.1 million in expenditures for garbage service provided by the contractor and only $19.6 million in revenue collected through customer payment, according to the report.
Historically, the Utilities Department had opted to use its reserve funds to cover high expenditures and changes in operational costs, but that balance was expected to be exhausted the end of this current fiscal year. In addition, taxpayer dollars aren’t eligible for use to reconcile the shortfall because not all Napans who pay taxes benefit from the garbage pick-up service.
In its presentation to City Council, the Utilities Department said “without reserve funds, the Solid Waste and Recycling Enterprise Fund is not sustainable, which could result in a reduction of regular garbage service for the city’s 23,000 ratepayers.”
Ahead of the rate increase, the Utilities Department issued a six-page information booklet to all property owners and ratepayers. However, the Grand Jury found it “lacked full clarity in explaining to the ratepayers how revenues are collected and how expenditures are spent.”
It found a number of expenditures – including a lawsuit regarding the closure of the old Coombsville dump and repair of sidewalks damaged by the weight of waste, recycling and collection trucks – hadn’t been adequately explained in the booklet.
“It’s not like anything wasn’t there,” Miller said, detailing the dozens of pages of staff reports and supporting documents that were made available to the public. “But, yes, we will consider different labeling of certain categories based on the Grand Jury’s funding, but nothing was being hidden.”
In accordance with Proposition 218, a California law that guarantees voters the right to respond to proposed tax or rate increases, the city provided every customer a 45-day review period to evaluate the proposal and protest, if desired. It sent out hard copies, not required by law, and information on how customers could use smaller bins to lower their rates.
Notice of protest could be hand delivered or mailed to city hall, however it didn’t include any Spanish language translation or information about how to access a Spanish language version. According to the Jury, they were told the next rate hike notification will include instructions written in Spanish.
Ultimately, the Grand Jury offered commendations to the department for its “efforts in exceeding the minimum Proposition 218 guidelines ….”
The investigation yielded two recommendations: One, the Utilities Department Director notify all customers where to locate detailed budget information by the end of the year, to be updated annually; Two, the Deputy Public Works Director explore new markets for the sale of recyclable materials to offset any future shortfall.
Miller says looking at alternative sources of revenues is something they’re doing “every day,” but ultimately they have little control. COVID-19 has made a tough environment even tougher, he says, in terms of prospects for recyclable materials sales, but the department’s committed to “creative” solutions to avoid additional price increases.
“I think we feel we have an obligation to not come back to the ratepayers a second time during this period, but we don’t know if we’ve bounced off the bottom on material sales,” Miller said. “We don’t control everything, but we can control our reaction and, so the extent that we can, going back to the ratepayers in this same multi-year rate-setting would be a last resort.”
Napa City Council is required to respond to the Grand Jury within 60 days.
May 11, 2020
Napa Valley Register
By Carly Graf

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