Solid Waste of Time?

At its December 5th meeting, the Tacoma City Council is considering rates for public utilities. The adopted goal of the City is to have customers pay what it costs the utility to provide the service, an arrangement called "cost of service."

Gary Brackett, appointee to the Environmental Services Commission (ESC) and Manager for Business & Trade at the Tacoma-Pierce County Chamber, has examined two rate options currently before the City Council for consideration. Brackett compared the rate recommended by the ESC to a rate requested by some members of the Council that abandons the cost of service goal so as to lower costs for some residential customers.

Under the rate plan recommended by the ESC, cost of service rates would be achieved for all customers in 2010. Most downtown businesses, multi-family units and smaller firms use Front End Loader (FEL) containers to accommodate space limitations. This plan requires that rates for front load containers decrease during that period:

ECS Recommendation/Front End Loader (FEL)
(multi-family, small business, space-limited downtown businesses)
The rate amount currently charged for the 4 cubic yard front load container is $361.20. Cost of service for the 4 cubic yard front load container in 2007 is $289.97 per month. The proposed 2007 rate under the plan recommended by the ESC is $350.05. This recommended rate is still $61.08 above cost of service. The rate is proposed to be reduced by 3% per year until 2010, when the cost of service rate of $318.61 is reached. In 2011, the cost of service rate for this container service is $332.82, a 4% increase from 2010.

ECS Recommendation/Residential
(single-family, duplexes only)
The cost of service rate for the 30 gallon residential barrel in 2007 is $35.58 per month. The proposed 2007 rate recommended by the ESC is $30.05, a 7% increase from 2006. This recommended rate is $5.53 per month less than cost of service. Under the plan, the rate is increased by 7% per year until in 2010, when the cost of service rate of $36.63 is reached. In 2011, the cost of service rate for this container service is $38.00, a 4% increase from 2010.

Alternative Plan
An alternative plan has been proposed in which rates for front load containers would be held at current levels rather than being decreased by 3% per year. The additional revenue generated from doing this would be applied to subsidize the residential rates to reduce the increase from 7% to 6.2%. There would be no significant change to other commercial rates.

Alternative Plan/Front End Loader
In the alternative plan for the 4 cubic yard front load container, the rate would be held at $361.20 from 2007 through 2011. In 2007 this rate is $71.32 above the cost of service rate of $289.97 and $11.15 above the rate supported by the ESC. In 2011, it is $28.38 above the cost of service. By holding the rate at the 2006 level, reaching the cost of service is delayed beyond the planning horizon of 2011.

Alternative Plan/Residential
The residential 30 gallon barrel rate for 2007 would be $29.90 under the alternative plan, a 15 cent per month decrease from the other plan recommended by the ESC. In 2011, the 30 gallon barrel rate would be $37.45, 65 cents per month less that the $38.00 rate in the recommended by the ESC in the five-year plan.

This is an example of the differences between the plan recommended by the ESC--in which cost of service is reached for all customers in 2010--and the alternate proposed plan--where rates above cost of service are held constant with the revenues generated from this change used to offset the higher, residential rates increases.

The numbers provided above are specific for the container size indicated as an illustration. Other front load and residential containers will be impacted by different amounts.

This issue could represent a significant rate hike for some downtown properties. Be sure to let Councilmembers know which rate makes the most sense.