Disposal Rate Adjustments Using Annual Generation Factors

In the past many local governments entered into solid waste collection and disposal service contracts which set forth a single rate for the entire service. At that time, the cost of unloading (tipping fees) at the disposal facility were very low and seldom changed. When tipping fees did change, the collector would increase the customer’s rate. Sometimes it seemed fair and sometimes it seemed excessive, but since the original rate included the cost of both collection and disposal, there was never a beginning disposal amount to use for comparison in evaluating the disposal rate increase.

In recent years, this lack of a beginning disposal amount has become much more of a problem as disposal rates have increased significantly and seem to change almost annually. In addition, many disposal facilities now require that solid waste be segregated into several elements and charge different rates for these elements. For example, different rates may be charged for municipal solid waste, yard waste, construction and demolition debris, and tires.

  Residential Solid Waste Collection Service Rates

The rate charged to the customer for residential solid waste collection services should be comprised of two basic elements: the collection rate and the disposal rate.

• The Collection Rate includes all of the direct operating costs, indirect costs, and other administrative costs of collecting solid waste and transporting it to the disposal facility and it includes the collector’s profit. (For a discussion of collection rate adjustment methodology, see the SCS Technical Bulletin “Collection Rate Adjustments and the Refuse Rate Index).
• The Disposal Rate is made up solely of the charge for unloading (or tipping) the solid waste at the disposal facility. The charge (or tipping fee) normally is calculated using a dollar per ton formula. The disposal rate element should be considered a pass-through to the customer and should not include any profit or administrative charges.

  The Disposal Rate Issue

Disposal rates should only be increased at the time the tipping fee is increased. Therefore, the only issue to address in dealing with disposal rate adjustments is how much the increase should be. To avoid many future problems, this issue must be clearly addressed in the collection service contract.

  How is the Initial Disposal Rate Determined?

The initial disposal rate is calculated by multiplying the tipping fee times the annual tonnage generated by the residential unit (the residential unit annual generation factor). In the event that the solid waste stream is required to be segregated, with a different fee for each element, the disposal rate is the sum of the annual residential generation factor for each element multiplied by the tipping fee for that element.

  Generation Factors

Annual generation factors should be obtained by conducting a generation study. The generation study should be conducted every 2 to 3 years, or as often as there are significant changes in the solid waste program which affect the disposal rate. For example, if the solid waste program changes to require that new elements be recycled, the annual generation factor will change; or if the disposal facility requires that yard waste be collected separately and charges a different fee for that element, a new yard waste generation factor will need to be developed.

  Why a Generation Study?

A generation study is “site specific” and it produces current data. Unlike national averages which have no relationship to an individual collection area, a generation study is designed to produce solid waste generation data about each specific collection area. In addition, a generation study produces current information about the program in place in your collection area. This allows you to charge the customer for what they generate today, not what the national average was two years ago.

  Using Generation Factors

Once the generation factors are developed, they can be used to calculate disposal rate adjustments based on changes in disposal rates, or changes in the disposal system, or both. For example, assume your annual solid waste disposal rate of $43.20 is based on a generation factor of 1.2 tons per year and a tipping fee of $36 per ton. (1.2 x $36).

At the end of year 1, the tipping fee is raised to $40 per ton. Your new disposal rate beginning year 2 will be $48 (1.2 x $40).

Beginning year 3, yard waste must be separated from household garbage and the disposal facility institutes a tipping fee of $48 per ton for household garbage and $20 per ton for yard waste. You have the option of accepting or declining yard waste service. (A generation study performed over the last half of year 2 indicates generation factors for household garbage of 0.9 tons and for yard waste of 0.3 tons.) If you accept full service, your disposal rate for year 3 is $49.20. If you only accept household garbage service, your disposal rate for year 3 is $43.20.

Regardless of the number or complexity of the changes which occur in the solid waste system or the disposal rate structure, the use of annual generation factors will allow you to develop adjustments to the disposal rate which are based on hard facts and are equitable to both the customer and the collector.

SCS Management Services™ specializes in solid waste management financial needs working with SCS Engineers, SCS Field Services, and SCS Energy. SCS has offices nationwide providing these services to clients across the country.

For more information about how SCS Management Services™ can assist you in developing a disposal rate methodology tailored to your specific needs, contact