SACRAMENTO COUNTY'S SOLID WASTE DISPOSAL CRISIS

PROBLEM - Sacramento County will run out of disposal space at its Kiefer Landfill by year 2001, even if the State-Mandated 50% waste reduction and recycling requirement is met in year 2000. The County has obtained a permit to expand the Landfill sufficiently to cover waste disposal for 35 to 50 years, although the final decision to exercise that option has not been made. The present cost of operating the landfill is $15 per ton of garbage, and thus far, the County has not been able to identify another Landfill whose total cost for haulage and disposal of garbage would be cheaper. The County must evaluate its alternatives with respect to reducing costs to handle and dispose of its waste in the future, and to correct past political decisions to use the Landfill as a "cash cow" which has jeopardized this community's waste disposal asset. This is the story of the County's dilemma.

BACKGROUND - The County originally recommended expansion of the Kiefer Landfill in 1992 to handle its waste in the future, and in 1994 released a Final Environmental Impact Report (EIR) for the Kiefer Landfill Expansion. The Report dealt with expanding the Landfill height to 450 feet with a 675-acre footprint. The EIR essentially covered the expansion's effects on water and air quality. Heard before the Board of Supervisors on March 14, 1995, it resulted in their directing the County Waste Management & Recycling Division to revise the project and reduce the height to 325 feet. They also directed the Department of Environmental Review and Assessment to prepare a Supplemental EIR (SEIR) to analyze the revised project, and to include additional alternatives. The Coalition for Alternatives to Kiefer Landfill (CAKL), made up of people living close to the Landfill, opposed to its expansion, had pressed the County to look for alternative sites to the Landfill. The Supervisors responded in Board Resolution No. 95-0562 by creating the Kiefer Landfill Citizens Advisory Committee (KLCAC) to participate in the environmental process, and also provided a role for the Solid Waste Advisory Committee (SWAC) by designating SWAC as the hearing body for the Draft SEIR. The Draft SEIR was published in November 1997. The first public hearing before the SWAC was January 6, 1998.

THE KIEFER LANDFILL - In July 1997 the Sacramento County Taxpayers League began its investigation on use of the Landfill. The League's concerns were two-fold, i.e., that contaminants leaking from the unlined portion of the Landfill were polluting the County's groundwater; and belief that the expansion might not be the safest and best economic solution for County waste disposal in the future. The League's Executive Director, a Subsurface Geological Engineer, reviewed the Draft SEIR, was briefed as to technical details of the proposed expansion, and was provided a comprehensive tour of the Kiefer site and its contaminants extraction and disposal systems. The County also provided samples of the materials to be used for lining of the Landfill to preclude liquid leakage. Integral was use of a selected 60 mil composite material liner laid over a layer of montmorillonite (bentonite) type clay whose expansive characteristic, when wetted, serve as a sealing barrier, which will preclude liquid leakage below the landfill, even if the liner is punctured. As to the existing unlined landfill, presently contaminating the groundwater, the monitoring and extraction systems being used are the latest state-of-the-art, offering all the capability existent in any landfill with a similar problem. Its condition and clean-up operation is a reality the County will have to pay for, and live with for many years.

HISTORY BEHIND THE SEIR - The work leading to presentation of the Draft SEIR for public comment resulted in discussions by KLCAC of twenty-four alternatives. From the alternatives the KLCAC selected what they believed to be 8 viable options for the County, including using an alternative Landfill. Their work included knowledge that the City of Sacramento was planning to contract with a commercial operator to haul city waste to a site outside the County, in lieu of continued use of Kiefer. The City estimated they would save one million dollars or more a year. The selected alternatives are:

• Divert 50%; of Waste; Expand Kiefer; Life 37 years
• Divert 50%; Export 1/3rd of the Waste to Another Landfill; Life 44years
• Divert 50%; No Kiefer Expansion; All Waste Exported; Kiefer Closed
• Divert 60%; Export 1/3rd of the Waste to Another Landfill; Reduce Expansion to 77%; Life 43 years
• Divert 70%; Export 1/3rd of the Waste to Another Landfill; Reduce Expansion to 77%; Life 50 years
• Divert 70%; Export 1/3rd of the Waste to Another Landfill;
• Divert 70%; Export 2/3rds of the Waste to Another Landfill; Reduce Expansion to 32%; Life 50 years
• Divert 80%; Export 1/3rd of the Waste to Another Landfill; Reduce Expansion to 77%; Life 61 years

*State Requirement of AB939

However, the Draft SEIR did not identify a preferred alternative, nor, as is usual with all EIRs, did it perform an economic analysis of the alternatives. As a result the County had to have an independent cost analysis performed. A contract was awarded to Brown, Vence & Associates to perform the "Cost Analysis of KLCAC Alternatives To The Proposed Kiefer Landfill Expansion Project". The 1997 Report on the cost of the alternatives indicated they would cost from $5 million to $40 million annually more then the Kiefer expansion. To be sure the information on the costs would represent actual cost conditions, the Supervisors authorized use of an independent consultant to re-evaluate the cost of the eight alternatives. As a result, County Executive Bob Thomas formed a Citizens Advisory Oversight Committee, to prepare the Request for Proposals for consultants whom wished to bid on the re-evaluation, and to participate in the re-evaluation. League Executive Director Joe Sullivan was made a member of the Committee. Hilto Farnkopf & Hobson, LLC (HF&H) was the successful bidder.

ECONOMIC ANALYSIS OF SOLID WASTE ALTERNATIVES - The HF&H report was released on August 26, 1998 and provided an updated economic analysis of the 8 solid waste alternatives. Central to the analysis was an assumption that the yearly volume of waste to be handled by the County, after achieving the AB939 goal of 50% diversion, would be 876,900 tons. However, they believed the volume should be reduced by the 156,700 tons per year to be diverted by the City of Sacramento to a private facility, and by the anticipated 398,300 tons per year to be diverted by private haulers of commercial waste to private processing facilities to achieve their 30% diversion requirement under Solid Waste Authority Ordinance No. 2, and the further diversion of the remaining 70% of the waste to less expensive out of County landfills. Their Report stated that, "Because of the decline in the volume of waste to be handled by the County system and the less expensive cost of disposal at out-of-County landfills, we have concluded that it would be less expensive for the County to transfer County-controlled waste to an alternative landfill if it could secure disposal capacity at the rates assumed in the analyses." The report went on to state, "The County may be able to successfully compete for the disposal of the commercial waste stream (by reducing costs, revising current pricing strategies and/or financing countywide waste programs through fees at both public and private facilities.) If it secured this waste stream, it would be more cost-effective to dispose of the waste at the expanded Kiefer Landfill," They also recommended that, "the County preserve its option to expand the Kiefer Landfill until it secures either or both of these arrangements and can effectively select between these alternatives." These recommendations are the core of the attempts by the County staff to capture the commercial waste stream and which will drive the County to retain waste flow from new cities as they evolve, in much the same way they held on to the new City of Citrus Heights.

THE TAXPAYERS LEAGUE ASSESSMENT OF THE ECONOMIC ANALYSIS - In general the League concurred with the recommendations made by HF&H, and agreed that the cost analysis prepared by Brown, Vence and Associates, with HF&H's adjustments and their economic analysis, provide an excellent tool to aid in deciding Kiefer's future. The League also agreed with the need for the County to obtain the permit for expansion, recognizing that only by having the capability to use Kiefer could the County have any assurance that negotiation for use of another site would be competitive. Without that permit, the County would be at the mercy of commercial landfills during negotiations. However, it was made clear by the Committee that agreeing to the permit process did not give the County carte blanche to proceed with expansion. The expectation was that a better deal could be found. However, although 22 sites within 110 miles of the North Area Transfer Station were contacted, a report to the Board in February 1999 indicated that only 9 responded, and that none offered an economic advantage. However, for a proper analysis the Board was advised it would require "committed proposals" obtained from a Request for Proposal (RFP), backed by an up front policy commitment from the Board to actually implement a long-haul program. Without such a commitment serious proposals would not be received. Permission to do this was never granted.

Looking at the waste controlled by the County (residential waste as opposed to commercial waste), the HF&H analyses showed that unless Kiefer's costs were greatly reduced, and unless it was competitive enough to compete for commercial waste, it cannot be cost-effective when compared to commercial costs for both private haulage of waste, and use of another landfill. However, the analyses pointed out that it did not "consider non-economic factors." Obviously these also have to be considered as they skew cost comparisons to the detriment of Kiefer when comparing its cost to contracting out costs. These "non-economic costs" represent nearly half the cost of handling waste disposal, about $13 a ton, none of which provides money to run Kiefer. Such costs include a subsidization of transfer station operations (which the League objects to), subsidiary costs such as handling hazardous waste, special clean-ups, and the infamous ten-percent Asset Fee which the League has opposed from the outset of its investigation. This Fee, described as an In-Lieu Franchise Fee (charging the Waste Management's Enterprise Fund a 10% Franchise Fee each year as though it were a private contractor) is a clear violation of Proposition 218 with regard to Cost-of Service. It resulted in transferring $23.8 million, including $1.5 million this year, from the Waste Management Enterprise Fund to the County's General fund since 1995. A decision was made by the County to stop this practice in July 2000.

THE RAPID SLIDE TOWARD BANKRUPTCY- Until 1997 the flow of money into the Waste Management's Enterprise Fund exceeded costs, and it became a "cash cow' for the County. Free services and subsidization of residential homeowner's rates were prevalent. Residential homeowners have not seen an increase in garbage rates since 1992, except for a $2 increase for the green waste program. Their share of increased costs for waste disposal was covered by using accumulated money, held in a rate stabilization fund. When the City of Sacramento began using the landfill in 1994 good times became better, as the Tipping Fee at that time for use the Landfill was $21 per ton, and the Cost of Operation was $15 per ton. The extra $6 per ton was used to cover part of the non-operating fixed costs involved in containing the Volatile Organic Compounds contaminating the groundwater, and the gas extraction system used to flare methane gas generated in the unlined portion of the Landfill. The aforementioned Asset Fee was established in 1995. In 1996 the Board of Supervisors bought into the concept of consolidating utility rate hearings and rate smoothing, which the Taxpayers League opposed vigorously, to no avail. The consolidation reduced the number of public hearings, cut the time for public comment, and put pre-assumed rate increases on a five-year schedule, which, when approved by the Board, made future increases automatic. Also in 1996, a Revenue Bond Issue of $22.3 million was floated for buffer land around Kiefer, for AB939 improvements (Recycling Program Equipment) and an equipment shop at the Landfill.

And then the slide began. The bond issue included covenants requiring the County to retain money for debt coverage, a working capital reserve, a pledge to increase homeowner rates, and reduction of discretionary programs. To meet these requirements, the Board increased the Landfill tipping fee to $28.05 per ton, but kept homeowner's rates the same, despite the staffs advising them that the collected revenue showed a shortfall which would have to be covered by reserves. In 1998 the slide steepened. The County sold $13 million in bonds to use gas flared at the dump to generate electricity. However, notwithstanding the money earned, the project costs an additional $500,000 a year to operate. Also in 1998, the City of Sacramento decided to compete its solid waste disposal, and contracted to send its trash to a cheaper commercial landfill. The lose of the City's 156,700 tons per year, which began on May 17th of this year, coupled with many large commercial haulers opting to use more competitive private transfer stations, resulting in lose of another 500,000 tons of waste a year, created an immediate crisis.

THE FIGHT TO SAVE THE COMPANY - With shrinking revenues, and the excess money needed to cover the non-operating costs at Kiefer dwindling; with the Rate Stabilization Fund subsidizing the homeowners running dry; Waste Management was forced to make business, rather than political, decisions. To try to make Kiefer competitive enough to stop the flight of the commercial haulers, the staff asked the Supervisors to reduce the tipping fee to $24.50 per ton. At the same time they recognized that the loss in revenue had to be compensated by an increase in the homeowner's rate in the unincorporated County. They asked for a $4 per month homeowner rate increase, and a $4 million shift of non-operating Kiefer costs to the residential rates. What they got was the possibility of a minimum raise in the homeowner's rate of $1.40 per month this year, a Board directed reduction in the tipping fee to $26 per ton, and a shift of $2 million of the non-operating cost to the residential homeowners. In briefings to the Supervisors since those decisions, they advised that to make the operation whole would require the $24.50 tipping fee and about a $5 a month raise in the residential fee every year through year 2004. Coincidently, the reality of the cost of the vaunted green waste and recycling program hit. It earns only $400,000 a year, but costs $4 million a year to operate. To make matters worse, if that were possible, the County had to compete for the waste haulage of the new City of Citrus Heights. To win the competitive contract, the County had to reduce the rate for Citrus Heights residential homeowners about $2 under the rate for the County's unincorporated residential homeowners, and pay the City of Citrus Heights a 15% Franchise Fee in addition! And, in the future, the County will be facing the same problem if the Cities of Rancho Cordova and Elk Grove are formed.

The staff is charged with coming up with recommendations by November to make Kiefer whole. Among those already discussed are the signing of contracts with commercial haulers (there are no such contracts now) which will include a Franchise Fee, cost reduction resulting from phase out of the Asset Fee, closure of the South Transfer station, neighborhood routing of collections, eliminating some supervisorial positions, and not filling vacant positions. Many more are under consideration.

And that is the story to date.

Joe Sullivan

August 23, 1999