ANALYZING IMPACTS ON DIVERSION & REVENUE

Presented May 13, 2011

University of California, Berkeley

Stanley Ellicott

Yuichiro Hattori
Hirohide Matsu
Mark Reinardy

 Alameda County

" Municipalities
" Contracts with Service providers

StopWaste.org

" Improving diversion

Source: StopWaste.org, 2009.

 Livermore: Franchise fees account for 3% of city-wide general fund revenues (2.23m)
Fluctuations in cart subscription levels disrupt revenue stability

" Between 2009 and 2010:

64 gallon: 6163 to 4546 32 gallon: 16079 to 15244 20 gallon: 1378 to 4074

Each city has different prices for different size containers. Single-family: 20gal, 32gal, 45gal, 96gal
Conservation rates

" Linear rates mostly proportional to waste generated
" Used by most cities

Incremental costs of service

" Higher initial rates for small bins

*Examples of monthly rates 

Livermore Fremont 20 gal $11.56 $25.18 32 gal $19.29 $25.71 64 gal $42.40 $28.16 96 gal $70.36 $41.44

 Conservation rates

" Gives stronger incentives to choose smaller bins

" Ensures equity
" Potentially leads to substantial revenue decrease
" Gives weaker incentives to choose smaller bins
" Reects the true costs - another equity
" Improves revenue stability critical in the long-run

Incremental costs of service

* Most cities currently employ conservation rates

* Which rates would yield the optimal results?

 Single-family

" Least variation
" Consistent data

Four-bin system

" Successfully employed by the majority of cities
" Costs to change the current system

User fee rates

" Sustainability of the program
" Prerequisite for city revenues

1. Across-the-board price increase

e.g. 5% proportional increase for each size bin

maintains the same price ratio

2. Flat fee increase

e.g. $10 increase for each size bin

more incremental rates

3. Imposition of an additional fee

e.g. recycling fee for everyone

two-tiered rates

Change in revenues
Effect on the amount of waste generated
Distributional equity
User acceptability
Political and legal feasibility

 How do people respond to price changes?

Past research

" Household level price elasticity

Our project

" Change in subscription of each size of bin
" Econometric model

Change in revenue/disposal

Scenario 5% 10% $0.5 at Add. Fee*

Livermore 2.3% 4.3% 21.3% 8.3%

Fremont 5.6% 11.7% 10.8% 8.3%

* Fixed fee equal to one months subscription rate

Scenario 5% 10% $0.5 at Add. Fee*

Livermore -2.4% -4.8% 19.9% 0.0%

Fremont -0.9% -1.9% 9.4% 0.0%

* Fixed fee equal to one months subscription rate

Scenario 5% 10% $0.5 at Add. Fee*

Revenue

Disposal

* Fixed fee equal to one months subscription rate

 Transition from conservation to incremental

" Flat fee increase scenario
" More data is necessary to improve model

What we learn from past experience

" Fremont experienced in the early 90s
" No big change

Isolating consumer sensitivity

" Accurate measure of revenue change
" Identify less sensitive subscription levels

Changes to rates:
1. Annual rate increases

" Increase revenue quickly
" Do not require renegotiation

2. Move to incremental pricing structures

" Better reect true service costs
" Stabilize revenues over long term

Pricing Structure Option

Implementation

Benets

Shortcomings
More susceptible to shifts in revenue
May require more frequent adjustment
Over time, may result in extreme costs for some Weaker incentives to further reduce waste
Political and legal barriers to implementation, especially for at fees

Ongoing Increases to Conservation Rates

Smaller annual increases possible within current agreements

Larger across-the board increase w/ agreement update

Provide clearer incentives to reduce waste

Fairness in pricing proportionally to waste generation

Transition to Incremental Pricing

Generally require May insulate updates to service revenue ow from agreements

violent changes in Can involve waste generation
restructuring rate Fairness in better levels or levying of a reecting the true at fee
costs of waste and recycling services

Data gathering

" Maintain and update existing database tools

SubscripFon levels Total waste generaFon

Short term

" Relieve budget burdens
" Renew dialogue with providers

Long term

" Bolster and stabilize revenues
" Preserve gains in waste diversion

Thank you!