Proposed Solid Waste Rate Increase Returns to City Council [Updated]

City council last month considered whether to impose a steep rate hike for solid waste and alley maintenance. The proposed rate schedule would have raised rates much more steeply for multifamily customers than for single-family. We questioned the fairness of it and especially the regressive structure of the alley fee. Surprisingly, city council agreed to send it back to staff for additional analysis. Now it comes back to council but multifamily will get no break.

The Problem

In an open letter to city council prior to the November 17th council meeting we noted that solid waste rates for multifamily customers were proposed to rise by 100% over five years while single-family customers saw only a 60% increase. That would shift a greater proportion of the total residential solid waste expense to multifamily customers.

We also noted that the scheduled rise in alley maintenance fees represented an even greater disparity. The alley fee, like the solid waste rate, is paid by dwelling unit; it was proposed to rise by 170% over five year. But the problem with the alley fee is that it is assessed by dwelling unit and that gives a big break to the single-family customer. (Read more in our deep-dive: Solid Waste Services Rates are Rising and You May Pay.)

On the alley fee: consider that an average-sized 8-unit apartment building pays eight times the charge paid by the single-family customer right across the shared alley. Each parcel shares the same alley segment but the multifamily customer pays the flat fee for each dwelling unit just like the single dwelling unit on the single-family side.

The proposed alley fee increase of 170% over five years only magnifies that disparity. And the disparity yawns even wider when we compare the cost to multifamily customers relative to single-family customers on large lots. The latter customers pay only a single per-dwelling alley fee even though their portion of an alley is much larger.

In consideration of these burdens placed on multifamily customers, city council at the November meeting directed Public Works staff to look again at the proposed rate schedule.

No Gain on the Play

The solid waste and alley rates went back for additional analysis but staff concluded there was no better way to cover the city’s expense than to asses the waste and alley charges on a per-dwelling unit basis. Staff proposes several options in the December 6th staff report for council consideration:

• Option 1: Implement the rate increase schedule for solid waste and alley maintenance as proposed, starting in July with steeply-stepped increases each July in the following four years;
• Option 1b: Implement the proposed rate-increase schedule starting in July but defray the first-year rate hike with a temporary subsidy to all multifamily and commercial customers;
• Option 2: Delay the start of the scheduled annual increase for all customers from this July to the following January, which would be followed by scheduled increases each July as proposed.

The first option (#1) is no change; it is the option presented to city council in November. The third option (#2) gives all customers an effective 50% discount on the first-year rate hike by delaying the increase to January from July, but then resumes the proposed scheduled of rate increases each July thereafter.

The second option (the subsidy, option #1B) is a curiosity. Public Works staff raised the prospect of a subsidy to multifamily customers as an option during a council liaison meeting in late November. The subsidy would relieve certain customers of the increase in both carting and alley fees for one year while leaving the subsequent years of rate increases in place.

For multifamily customers, for example, the  subsidy as discussed would cover the year-one increase of $5.38 bimonthly per unit and the $4.85 increase in the alley fee bimonthly and cover those for the first year of the 5-year rate hike.*

Why provide a subsidy instead of simply moderating the rate increase or — better yet — reducing the multifamily percentage? Because that would allow the rest of the proposed rate increases to proceed as scheduled. There would be no need to restart the process, which state law might require, and the bonus is that it delays the expected public opprobrium over steep rate hikes to year two.

Moreover, a subsidy is simply easier to implement administratively than to undertake a wholesale rejiggering of solid waste and alley maintenance rates.

However the problem with the subsidy is that subsequent-year increases kick in more sharply and, overall, the magnitude of the rate increases for multifamily is undiminished. It would rise by 100% more for solid waste after five years and 170% more for alley maintenance. Ouch!

A Relative Few Multifamily Customers May Get a Break

There are two additional options discussed in the staff report that would affect multifamily customers who receive curbside (not alley) refuse service:

• Option #3: cut the curbside multifamily rate while implementing the rate schedule for everyone else as proposed starting in July; and,
• Option #4: cut the curbside multifamily rate and delay the rate hike for everyone until January 2022.

These options require some explanation. Today the curbside multifamily rate is the same as the rate for all multifamily customers. The difference is that most customers see alley pickup 2-3 times per week, while about 77 multifamily properties roll their waste to the curb for pickup once per week. The Public Works department is offering city council the option to cut the rate for just the curbside customers. But the rationale is thin.

The rate change for curbside customers would shift curbside customers from a flat per-dwelling unit charge (which is paid by all multifamily customers today) to the rate charged to single-family customers which is calculated based on square footage. For single-family customers is it lot area; for curbside it is proposed to be come combination of lot area and building area (the exact formula is not provided).

The upshot of the proposed rate change for multifamily curbside customers only would give those customers an average solid waste collection rate cut of 44%. That is an average across the 77 properties, which is about 7% of all multifamily properties. However multifamily customers with a greater number of units should see much greater savings as the per-square-foot rate for solid waste would be divided among more units.

Why cut the rate only for curbside multifamily customers? The rationale is that curbside pickups occur only once per week and not 2–3 times per week for multifamily alley pickups. However cut would benefit just 77 multifamily customers with properties of 3-units and larger.

That rationale doesn’t stand up, though, when Public Works is proposing to exempt duplex curbside multifamily customers from the rate change; the duplexes would pay the per-dwelling unit rate. Why? The staff report says that duplexes would see their monthly refuse cost rise under the proposed curbside rate change (only two units would divide the total parcel cost of solid waste collection). They get a pass.

The proposed change from per-unit to per-square-foot rate not only would provide an immediate and substantial rate cut for a minority of curbside multifamily customers; it would reduce the rate of increase in rates for those customers throughout the 5-year rate schedule period.

Back to those two options, #3 and #4, staff recommends option #4:

Approve the proposed rates as noticed and make an administrative change to approximately 73 [multifamily] accounts with curbside collection service to be charged at the residential single-family refuse rate per square foot multiplied by the sum of the lot size and building size, with an effective date of January 1, 2022. All other rate increases would occur July 1 of each year beginning July 1, 2022 through FY 2025/26.

This staff-recommended option fails to address the broader concern about multifamily rates that are proposed to rise much faster than for single-family customers and even for curbside multifamily customers. The six-month reprieve for all customers is merely a sweetener. But six months into the rate-increase schedule the higher rates kick in, and then six months later the year-two increase kicks-in.

Off the table entirely in this recommendation is the subsidy. Council will discuss the subsidy, the delaying of the rate increase, and the curbside rate change at the December 6th evening meeting. Refer to the agenda for information about how to participate.

Our Take

When city council suggested that staff take another look at the multifamily rate hike, we expected a renewed assessment of how the proposed rates ask multifamily customers to shoulder an increasing proportion of the burden of residential waste expenses. We illustrated that disparity in our open letter to city council. Here’s the chart.

Unfortunately staff did not actually consider restructuring the rates to moderate the multifamily increase; instead the options on offer merely tinker at the margin. That is disappointing; had city hall really considered the disproportionate impact on multifamily customers of the proposed rate schedule, we might have seen a revised plan featuring more proportionate increases for multifamily customers.

The prospect of steeply-rising solid waste and alley maintenance charges in the coming years suggests that landlords will be more likely to pass them on in the form of a refuse surcharge, which is allowed by the rent stabilization ordinance if the lease terms allow. Today many renting households do not pay the surcharge. Households that will begin to pay the passed-through refuse surcharge will feel double the pain: a new surcharge of $30 per month on top of base rent and an annual increase of 15% each year. The surcharge is proposed to top out at $66 per month in 2025.

Landlords are already asking the rent stabilization office about when they can pass through the refuse cost. The immediate answer is not while there is a pandemic emergency. New tenancies could see the refuse surcharge imposed now.

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*The staff report also raises the prospect of a ‘Pandemic Relief Fund’ to target the subsidy to an estimated 15% of multifamily households affected by COVID–19:

This program will assist qualifying MFR customers by offering a subsidy for the rate increase on their refuse bill. This program would offer assistance for the difference between the current refuse bill and the increased refuse bill once adjusted rates take effect. As an example, current bi-monthly rate for MFR customers per dwelling unit is $36.62 and the proposed first-year rate adjustment is $42.00. The Pandemic Relief Fund would subsidize the difference, which amounts to $5.38 every two months. The criteria used to evaluate a customer’s eligibility will be aligned with the current Rent Stabilization rent subsidy program. — Staff report, December 6

Frankly we couldn’t understand how the Pandemic Relief Fund jibes with the proposed broader subsidy for all multifamily and commercial customers. Read the staff report and get in touch if you understand it!