Agenda Report TO: FROM: CCCSWA BOARD OF DIRECTORS WENDY NELSON, FINANCE MANAGER/CONTROLLER DATE: APRIL 26, 2018 SUBJECT: OPERATIONS, DIVERSION INCENTIVE, REUSE FUND AND WALNUT CREEK RESERVE FUND BUDGETS FOR FISCAL YEAR 2019 SUMMARY Fiscal Year 2019 (FY19) budgets are being presented for Board approval. This was preceded by a presentation of the draft budgets to the Finance & Administration Committee on April 3, 2018. The FY19, Operations Fund (Ops) Budget (Attachment A) is for routine functions of RecycleSmart and administrative activities. The FY19, Diversion Incentive Fund (DIF) Budget (Attachment C) is primarily for special programs, one-time expenses, start-up and/or pilot recycling programs. The revenue and expense of the FY19 Reuse Fund Budget (Attachment D) was approved at the January 25, 2018 Board meeting during the rate setting process. The FY19 Walnut Creek Reserve Fund Budget s expenses (Attachment E) are estimated to total $204,904. The funds will be used to increase the recycling efforts in Walnut Creek. RECOMMENDED ACTION 1. Adopt Operations Fund, Diversion Incentive Fund, Reuse Fund and Walnut Creek Reserve Fund Budgets for Fiscal Year 2019, as set forth in Attachments A, C, D and E and approve the Fiscal Year 2019 Balance Statement, as set forth in Attachment B. DISCUSSION Background The Operations Fund budget is one of RecycleSmart s two funding sources for the agency s day-today operations. These funds are primarily generated from fees that are contained in the residential and commercial solid waste rates set by the Board of Directors each year and collected by Republic Services. Page 1 of 7
The second funding source is the DIF, which is funded through the sale of residential and commercial recyclables collected from the service area and processed by Mt. Diablo Recycling (MDR). These funds are used primarily for special programs, one-time expenses, start-up and/or pilot recycling programs. The DIF is also used for other special diversion/solid waste related activities as approved by the Board. Operations Fund A. Revenue As stated above, the revenue for the Operations Fund is primarily derived from fees contained in the solid waste rates. The fees approved by the Board in January 2018 for Rate Year 4 totaled $1,649,239, resulting in a FY19 estimated JPA Revenue of $1,704,213. In addition, the Ops budget receives revenue from an interest-bearing account and other miscellaneous sources. As shown in Attachment A, total funds available for FY19 are estimated to be $3,040,145 which includes a projected beginning year fund balance of $1,198,858. Estimated revenue by source is also shown in Attachment A. B. Expenses The budget includes the following expenditures: 1. Personnel Services: expenses include staff salaries and benefits, worker s compensation, unemployment payments, Board Member remuneration, temporary staffing on special projects, and scheduled merit step increases for eligible employees. Expenses for this category total $1,124,538. Included in the Personnel Services line item are annual Merit increases (two for FY19) and a 1.5% cost of living adjustment (COLA) for the Executive Director, and 2.9% COLA for all other staff which would become effective July 1, 2018. The 2.9% COLA is based on the (December 2016 to December 2017) Consumer Price Index (CPI) from the U.S. Bureau of Labor Statistics. On January 31, 2018, Staff met with the Personnel Committee and they unanimously voted to recommend the above COLA to be included in the draft budget for the Finance Committee review. The Personnel Services budget also incorporates the results of a compensation salary survey conducted by Municipal Resource Group. As a result of the survey, the consultant recommended two positions be aligned with the surveyed agency averages. The reclassification of the two positions, Secretary to the Board and Finance Manager, have been incorporated into the FY19 budget. On January 31, 2018, Staff met with the Personnel Committee and they unanimously voted to recommend the salary adjustment for Secretary to the Board and Finance Manager to be included in the FY19 budget. The new salary range for the Secretary to the Board is $103,284.83 - $111,206.22 and the new salary range for the Finance Manager is $143,617.75 - $167,270.12, all other positions were unchanged. Page 2 of 7
2. Materials and Supplies: expenses include memberships and subscriptions, office supplies, postage, reprographics, travel, staff development, and capital purchases. Expenses for this category total $90,811. 3. Professional Services: expenses include legal services, computer troubleshooting and maintenance, auditing services, financial fees and services plus other consulting expenses generally not associated with a specific program. Expenses for this category total $294,700. 4. Rent and Utilities: expenses include insurance, office rent, and telephone charges. Expenses for this category total $126,318. Overall Operation Fund Expenses for all four budget categories total $1,636,368. Special Item: An actuarial valuation was performed by Bartel and Associates on the Authority s net pension liability and presented to the Board during the January 25, 2018 meeting. As part of the presentation several options were presented to address the liability, including prepayment of the liability. A total of $200,000, of the $400,000 liability, which can be used as part of the prepayment option has been incorporated into the FY19 budget as was presented to the Finance Committee. On April 20 th, Bartel Associates provided a report comparing two options for addressing the unfunded pension liability: (1) make additional payments to CalPERS, or (2) set up an Irrevocable Supplemental Pension Trust. Bartel Associates referenced additional payments to CalPERS to pay down the liability would save the most money. C. Fund Balance Based on the above estimated revenue and expenditures, the Operations Fund balance at the end of FY19 is estimated to be $1,203,778. Diversion Incentive Fund A. Revenue Revenue into the DIF primarily comes from the number of recyclables collected by Republic Services and delivered to MDR, times a $55 per ton fee. Home composting revenue consist of compost bins and compost classes. Total FY19 revenues are estimated at $2,557,625. B. Expenses During FY19, it is projected that expenditures, in pursuit of increasing diversion, from the DIF will total $999,595. The expenditures related to those programs and activities are listed in Attachment B. The DIF budget includes expenditures as follows: Page 3 of 7
1. C&D Program (existing program) is budgeted at $30,504 in an effort to continue and improve RecycleSmart s ability to track C&D diversion in the service area. The cost will cover: (1) Support for member agencies use of the Green Halo City Tracker system. This is fundamental to member agencies staff s ability to record and confirm compliance with the C&D Ordinance s diversion requirements, (2) Development of an improved regional certification procedure for facilities that process C&D waste resulting in a recovery rate greater than 65%, and (3) Expanding the functionality of the Green Halo system by linking with the ACCELA electronic permitting management system to improve reporting efficiency and reduce staff costs. 2. Commercial Recycling Program (existing program) is budgeted at $106,433 to continue outreach and assistance and track self-hauled recycling with the goals of increasing participation and diversion. SCS Engineers is currently in the first year of a contract with an option to extend for two additional years. This proposed project funds SCS work for a 2 nd contract year allowing them to continue their assistance and supplement Republic s outreach and support to commercial accounts. This program will promote the use of current recycling and organics services while expanding service capacity or collection frequency. The program also directly supports RecycleSmart s response to the requirements of AB 341 (Mandatory Commercial Recycling) and AB 1826 (Mandatory Organics Recycling). See Attachment F for additional program information and current year project progress. 3. Community Funding Program (existing program) is budgeted in response to the many requests staff receives throughout the year for sponsorships and support of local recycling efforts and outreach in our service area. Currently budgeted at $5,000, staff is projecting that this amount will cover the cost of assisting the community with recycling efforts and outreach. 4. Home Composting Program (existing program) is budgeted at $60,850 for items associated with RecycleSmart s Home Composting for Busy People Program, including: workshops, instructor contracts, outreach, compost bin shipping, CompostSMART Advanced Training and other resources and tools. RecycleSmart is also budgeting to develop a composting demonstration site at the new community garden at The Gardens at Heather Farm in Walnut Creek as a resource for the community. The RecycleSmart Home Composting Program promotes source reduction through backyard composting as well as peer-to-peer education to increase awareness of diverting organics. 5. SB 1383 - Organics Reduction Program (existing program) budgets $46,000 to continue HF&H consulting assistance for program planning that will support compliance with organics reduction requirements of SB 1383. SB 1383 includes organics reduction targets of 50% by 2020, 75% by 2025 (from 2014 levels), a new edible foods recovery program, and penalties for non-compliance. This project follows work performed by HF&H to identify and analyze eight programs for adoption by RecycleSmart. The follow-on work funded in FY19 will support planned implementation of the selected programs, including (1) Action Plan for implementing the selected programs, (2) Program Funding Strategy, and (3) Edible Food Recovery Plan. These plans will be presented to the full Board as they evolve. Page 4 of 7
Staff has also included $35,000 to continue to provide compost bins to residents and schools at a reduced price to encourage organic waste reduction, and more importantly sourcereduction, where the material is not collected, transported, nor processed. Source reduction is the highest tier in the waste reduction hierarchy and plays an important role when developing the annual report to CalRecycle. 6. Multi-Family Recycling Program (existing program) is budgeted at $101,522 to continue expanded outreach and technical assistance to the multi-family sector. This program promotes the use of current recycling and organics services while expanding service capacity or collection frequency. Cascadia Consulting will perform this work under their three-year contract with RecycleSmart by contacting property managers and providing door-to-door assistance to tenants. This additional assistance is necessary because direct assistance to multi-family accounts exceeds the ability of Republic staff to perform these activities in a timely manner. This program also supports RecycleSmart s response to the requirements of AB 341 (Mandatory Commercial Recycling) and AB 1826 (Mandatory Organics Recycling). See Attachment G for additional program information and current year project progress. 7. RecycleSmart Advertisement Campaign (existing program) is budgeted at $63,500. These funds are used to increase customer awareness of RecycleSmart and its existing programs, while also increasing traffic to the RecycleSmart website. The budget includes photography services, local print and online advertising, annual large-format Food Recycling Project recognition ads, Business Awards and outreach materials for passed or upcoming legislation. RecycleSmart also budgets to partner with local events, radio or other venues for extended outreach and advertising campaigns. 8. Recycling Contractor (existing program) is budgeted at $89,166. The contractor focuses on increasing diversion efforts for the multifamily and commercial sectors. This contract is being funded by an agreement between RecycleSmart and Republic Services which ends in August 2018. After the end of the agreement, the recycling contractor will be funded by RecycleSmart. 9. Reusable Bags (existing program) is a program that was created out of our efforts to decrease the use of single use plastic bags and brand RecycleSmart as the go to place for information on recycling and waste diversion in the Central Contra Costa community. As a result, we have included this line item for FY19 at $5,000. 10. School Recycling Program (existing program) is budgeted at $139,019 for RecycleSmart school contractor s (with direction from staff) activities geared towards education and increasing diversion rate at schools. 11. Special Events (existing program) is budgeted at $14,000 for staff to attend local community events, such as Community Fairs, Festivals and Earth Day events, and to purchase displays, visuals and outreach tools for the RecycleSmart booth. Staff also attends trainings and other events to gain industry information, such as attending Solid Waste Association of North America, California Resource Recovery Association, and BioCycle. Page 5 of 7
12. Wastebusters Program (existing program) provides certifications to schools within RecycleSmart s service area for their participation in recycling programs and provides cash rewards for schools that reach an above 50% diversion rate. Due to these awards being given at the end of the school year (generally in May) it is unknown how many schools will qualify, so the $15,000 budgeted will provide for all schools that are eligible. 13. Residential Newsletter is budgeted at $283,120 for RecycleSmart s dedicated outreach channel to single family residents. The newsletter is relied upon as one of the many methods of customer communication about RecycleSmart s programs and services. A residential survey was completed January 2018 showing 80% of the readers found the newsletter informative. 14. Self-Haul Origin Review (new program) is budgeted at $24,500 and will allow the selected contractor to investigate self-haul waste that is reported as generated in our service area and taken to distant disposal facilities. In 2016, self- haul reported by CalRecycle as generated in the RecycleSmart service area accounted for 24 percent of total disposal. This is material that RecycleSmart has no control over (unlike material collected by the Republic franchise) negative impacts our service area diversion and rate. See Attachment H for additional program proposal information. Total Expenses for FY19 are budgeted at $999,595. Reuse Fund The Reuse Fund budget is setup exclusively for the purposes of payments toward the Reuse and Battery collection programs. Republic Services collects these funds from rate payers and provides them to RecycleSmart for payment to MDR for their services. The funds for this service were approved at the January Board meeting during the rate setting process. The revenue and expenses of $1,127,511 for the Reuse Fund Budget are provided in Attachment D of this report. Walnut Creek Reserve Fund The City of Walnut Creek is using their reserve funds to increase recycling efforts in the following areas: 1. Commercial Recycling Program budgeted for $97,811 to increase the Walnut Creek efforts of the CCCSWA Commercial Program listed above. See Attachment F of this report for details of the program. 2. Multi-Family Recycling Program is at $107,093 to increase the Walnut Creek efforts of the CCCSWA Multi Family Programs listed above. See Attachment G of this report for details of the program. Total expenses listed in Attachment E for the City of Walnut Creek budget are $204,904. Page 6 of 7
ATTACHMENTS A. Operations Fund Budget for FY 2019 B. Balance Statement for FY 2019 C. Diversion Incentive Fund Budget for FY 2019 D. Reuse Fund Budget for FY 2019 E. City of Walnut Creek Reserve Fund Budget for FY 2019 F. Program for FY 2019 Budget: Commercial Recycling Assistance G. Program for FY 2019 Budget: Multi-Family Recycling Assistance H. Program for FY 2019 Budget: Self-Haul Origin Review Page 7 of 7