The moves are part of a broader city effort to bring stability to the volatile Refuse Fund, which has been losing money for several years and is facing a $3.7 million deficit in the current fiscal year. City officials are also trying to bring the refuse system in compliance with Proposition 218, a state law that bars cities from setting rates that exceed the cost of providing the services for which these rates are charged.
Palo Alto currently charges commercial customers more than the cost of the service provided. Residential customers, meanwhile, get a major subsidy from the city. According to a Public Works estimate, the residential rates would have to be raised by 79 percent and commercial rates lowered by 42 percent for parity to be reached.
The City Council Finance Committee discussed on Tuesday night a variety of staff proposals for balancing the Refuse Fund's short- and long-term budget deficits. The committee balked at a staff proposal to raise residential rates by about 13 percent in October and asked staff to instead consider a flat fee that could be added to each residential garbage bill. The fee would help cover the trash, recycling and composting services.
The new fee is one of many changes the city is considering for its cash-strapped refuse operation, which depends on traditional trash for sustenance. The city loses revenue every time a customer goes green and switches from the standard 32-gallon trash can to the cheaper 16-gallon minican. So while residents are encouraged to recycle more and throw away less, these green efforts are also expanding the budget hole in the Refuse Fund.
To deal with this problem, the city is undertaking a Cost of Service Study that would analyze the costs of each service and allow the city to completely overhaul its rates, possibly adding charges for composting and recycling. The study is scheduled to be completed in November.
In the meantime, committee members agreed Tuesday on the flat fee for residential customers. Though a flat fee would not encourage conservation, it would bring the city closer to Proposition 218 compliance. The new fee would go in effect in October.
Councilman Greg Schmid and Councilwoman Nancy Shepherd both said Tuesday that adding a fixed fee to customers' refuse bills would bring the city closer to rate parity. Schmid said Tuesday he was "startled" by the existing disconnect in the Refuse Fund between what the residents pay and the services the city provides. Under the current system, he said, customers could be paying for services they might not get.
"How can we be charging garbage rates to pay for all the other services?" Schmid asked.
Staff also proposed saving money by replacing the existing Recycling Center with a smaller facility that would be open twice a week, four hours per day. It would cost about $525,000 to make the needed site improvements, but the city would save about $300,000 a year when compared to the cost of running the current facility.
The committee, however, decided to take it a step further and asked staff to consider a full closure of the Recycling Center. Only about 6 percent of the city's total recyclable items were deposited at the Recycling Center in fiscal year 2011 — down from about 13 percent in 2008, according to Public Works data.
Councilman Greg Scharff said he would rather see the facility close and have the city add three to four "cleanup days" in which trucks would pick up items that would otherwise be bound for the Recycling Center.
"I'd like to come up with a plan to eliminate the Recycling Center," Scharff said. "I think it makes sense."
Residents would also be able to take their fluorescent lamps, cooking oil, CDs, motor oil and antifreeze to the Sunnyvale Materials Recovery and Transfer Station (SMaRT).
Staff is scheduled to return to the committee on July 19 with a fee proposal and more thorough analysis of the possible closure of the Recycling Center.
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