New Waste Disposal Contract a Total Loser for Oxnard Residents

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by David Grau

On City Council Agenda 10/1 at 6:30

 

Council-members,

The September 24th editorial by Ventura County Taxpayers Association and subsequent comments to Oxnard City Council expressed concerns about the proposed agreement with VRSD.  The primary question centered around the low rate (20% below Toland’s cost of operation) and recently disclosed capacity limitations at Toland that could result in half of contracted additional tonnage being diverted to other landfills.The VRSD agreement specifies Oxnard will deliver 81,000 additional tons a year to Toland.  According to state records, less than half that tonnage can be accepted before reaching daily tonnage limits – the remainder will be diverted to other landfills.

According to Cal-Recycle in 2012 Toland tonnage was = 344,785/ 260 days (open 5 days a week) = 1,326 average tons per day vs. permit of 1,500 tons or already at 88% capacity.
  
Toland can accept about 150 additional tons per day x 260 operating days (closed Saturday) for a maximum 39,000 tons vs. 81,000 tons in the Oxnard agreement – just 48% of new annual volume.

More than half will be diverted – with additional freight costs and carbon emissions.

We have two questions:

1) Question:  State documents show Toland can accommodate 39,000 new tons per year before reaching its permitted daily limit.  Why would Oxnard agree to deliver 81,000 additional tons, when Toland is restricted by permit to accept less than half those tons?

2) Question:  Given two choices from Staff Reports: 
a) Retain tonnage split (Toland vs. Simi) costs $8,876,000 per year – cost includes a 10% rate increase for Toland, that reduces losses and improves long-term competitive outlook for the landfill, or 

b) Increase tonnage for Toland costs slightly more or $8,900,000 per year – this option requires Toland to not only eliminate the approved 10% rate increase, but also to reduce rates (below cost of operation) another 8% for all customers – increasing losses that will be made-up by dipping into reserves.  

The unintended consequence of the 8% rate reduction in this option is it will provide a financial a windfall of $550,000 a year for customers and trash haulers in the other seven cities – but no benefit for rate payers in Oxnard – who have the highest trash rates in the County.  

The change in allocation of tonnage between the two landfills will cost the County $200,000 a year in lost fee revenue because less tonnage will be sent to Simi Valley Landfill from Oxnard.

Why would Oxnard chose an option that costs more, benefits rate payers and voters in every city in VRSD but Oxnard, costs the County fee revenue and one that potentially puts Toland landfill in a weaker financial position?

Last week VRSD General Manager Lawler said the landfill was “operating on thin margins”.  In reality the landfill has no margin and loses $1.2 million a year even with the 10% rate increase – the landfill needs $37 per ton to break-even.  

Approving a contract that contains an arbitrary rate of $29.50 that is 20% below operating costs at the landfill for all customers, will not help Toland achieve the of of financial stability.  And this agreement will not secure Toland in it’s role of providing competition for the other landfill in the County and to prevent a monopoly.  In fact, it may achieve the opposite.

David P. Grau
Chairman VCTA

Interested Oxnard residents can contact the City Council through this link:  City Council Members 

 

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Interesting debate at City Council meeting last night. While VCTA brought out many good points and may have even provided info to help negotiate a better contract, consider this:
1. VRSD can increase capacity quickly with few impediments
2. VRSD claims capacity increase could swing the organization to be more profitable, via favorable overhead volume variances, although VCTA still disputes whether that wouldn’t be offset by higher variable costs. Capacity increase would involve working Saturdays, improving the drying process and moving some waste to other facilities. It is not a slam dunk, but can be done.
3. It appears that VRSD may need this contract to stay solvent and that failure to get it and stay financially viable could hurt waste disposal in the entire region, jeopardizing viability of VRSD and possibly overloading WM and pushing up long term rates. On the other hand, the more efficient WM might takeover the VRSD facility.
4. Councilman MacDonald correctly pointed out that there is a clause in the Waste Mgmt contract that forbids Oxnard from using any vendors except WM and VRSD. This may be academic, since the only other facility within range is in Calabasas, is far more expensive and may not even be available.