Digging Into the Numbers Burying the Landfill
By Doug Dalager
Mayor Bruce Hagen has called a special session of the Superior City Council for this Tuesday, August 25th at 6:30 p.m. The sole purpose of this meeting is to come to some resolution over the City landfill, which has already required a $500,000 shot in the arm in 2015 from the City’s general fund to keep it afloat.
The council rejected the Mayor’s ordinance proposal last week that would have added a $9.75 per household fee per month, in hopes of staving off an impending deficit. Reasons for rejecting the fee varied by councilor, with Councilor Dan Olson speaking out in favor of a lower monthly fee of $7.75, Councilor Graham Garfield proposing a staged increase in the fee from $7.75 to $9.75 over three years accompanied by a reduced $6.75 fee for seniors and those at or below the poverty line, and others, including Esther Dalbec rejecting all fee proposals of any sort.
For background information on this article, please see three other articles Explore Superior has already posted about this topic that can be viewed by following these links:
- Trash Talk Dominates City Council Meeting – August 18th
- Councilor Bender’s “Pay as you Throw” Proposal – August 20th
- Councilor Garfield’s Stepped Fee Proposal – August 22nd
In this article we will attempt to answer some of the questions that have been swirling around the digital drain we all know as Facebook.
Why was there no forewarning about this problem?
This has been an issue facing the City of Superior for a number of years, and the record shows that it has been raised on numerous occasions with the City Council. Finance Director Jean Vito stated that she notified the City Council of financial concerns regarding the landfill beginning in 2013 when the 2014 landfill budget was adopted. The City was informed about the possibility of a state levy limit and limitation on fees by the League of Wisconsin Municipalities on May 9, 2013, which spurred the City to begin an internal discussion about how best to approach the coming financial crunch at the landfill.
In late May of 2013, the landfill issue was brought to the City Council leadership, and public presentations were held beginning June 4, 2013 seeking a fee of $20 per month. However, before a fee could be considered by the City, legislation passed at the State level in June 2013 that forbade implementation of a fee, retroactively to January 1, 2013, without a corresponding reduction in the local property tax levy.
Blocked from adding a garbage fee, the City hired a consultant (NewGen Solutions) to provide the City with a cost of service study, a watershed analysis, and a valuation for the landfill. By mid-June 2014, NewGen recommended the City implement a recycling fee (which was permitted under state law) and recommended that the City pursue a legislative language change to allow implementation of a fee to supplement the cost of operating the landfill. That fee is $3.50 per household, $3.08 of which goes to Hartel Disposal for their services of picking up recycling and providing containers for each household or small business. The balance of that fee is used for the annual leaf and brush pick-up, and hazardous waste pick-up, both of which are provided to City residents as part of their recycling fee.
For the remainder of 2014, the Finance Committee, with City Council representation, reviewed the landfill 2015 budget, as well as recommendations to seek bids for privatizing garbage collection, and to possibly sell the landfill. Through that process, the 2015 landfill budget was brought forward to the entire Council with notice that a funding solution was needed no later than by year end of 2015. From December of 2014 through May of 2015, proposals for privatization of garbage collection and sale of the landfill were solicited, received, and analyzed.
In June of 2015, the State of Wisconsin adopted a budget with legislative language changes that allowed the City of Superior to charge a fee for garbage collection with no required reduction in the tax levy. Armed with this change in legislation, the City’s landfill internal review committee reviewed proposals regarding privatization and landfill sale, and ultimately recommended that the City continue to operate the landfill but begin to charge a monthly fee of $9.75. The committee also recommended that the City not sell the landfill.
What are the consequences of not finding a solution?
Mayor Hagen has gone on record as stating that he believes the best solution to the landfill problem is to implement a $9.75 fee per household and small business effective January 2016. He and his administration believe that this is the fiscally responsible path that insures the City will be able to both balance its general fund budget and keep the landfill above water.
If enacted, this fee would bring in in excess of $1M per year in revenue that would be expressly for the use of operating the landfill. This would allow the City to establish a reserve fund for the landfill that would not only cover future shortfalls, but also provide a safety net for unknown expenses such as increased tipping fees, equipment failures, etc.
Should the City Council fail to reach a suitable proposal to offset anticipated budgetary shortfalls in coming years, the City will have no choice but to move moneys from the General fund to the landfill. With no action, the City administration projects a cumulative budget deficit of approximately just under $6M through 2020. According to the City, the proposed $9.75 fee would offset those shortages and leave a reserve of about $2M.
Since the City is required to submit a balanced budget each year, failure to cover the losses at the landfill will necessarily result in budget cuts across the board at the City level. See the following graphic to better understand where the City share of your property tax dollars go are spent.
Landfill expenses currently come from the landfill enterprise fund with an annual budget in 2015 of approximately $6.2M. This year the City reallocated $500,000 from the general fund to the landfill enterprise fund expressly for the purpose of covering a revenue shortfall at the landfill.
In the 2016, the landfill shortfall is projected to be $1.1M, and unless new revenue is found, the City will have no alternative but to make cuts elsewhere.
Earlier this year, a recycling fee of $3.50 per month was assessed Superior households, and met with little opposition. Unfortunately those revenues are insufficient to stave off additional City funds being buried in the landfill to balance the books.
Why has the cost increased so quickly?
Operating the landfill was a profitable operation until 2002. The WLSSD was paying the City for the opportunity to dump garbage from throughout the district in the Superior landfill, and the costs were well within the means of the City to manage. This graphic shows the boundaries of the WLSSD.
Then the cost began to creep upwards, slowly at first, and faster as new regulations came online. As recycling became more accepted and expected, the amount of garbage going to the landfill declined…as did the amount paid to the City for accepting garbage. At the same time, the Environmental Protection Agency and the Wisconsin Department of Natural Resources enacted new regulations that increased the costs of operating the landfill.
The DNR tipping fee, the fee charged per ton of garbage dumped, went from $1.50 per ton in 2002, to $13.00 per ton in 2015. Ironically, this fee is paid to the DNR by the City in order to dump garbage in the landfill which is owned by the City. Additionally, should the landfill be capped and closed in 2023 as currently projected, the City will be required by the DNR to monitor the landfill for 40 years beyond its closure at a cost of $110,000 per year.
Where your property tax dollars go?
A common topic of conversation around Superior centers on the assumption that the cost of garbage is included in their property taxes. When faced with the prospect of another fee to pay for the shortfall at the landfill, some wonder if that means their real estate taxes will be reduced accordingly. Others have asked how much of their taxes currently go to garbage disposal.
There was a state law enacted in 2013 that forbade cities with municipally owned landfills from passing along any new garbage costs to their residents, unless their real estate taxes were reduced by the same amount. At the time, there were only two municipally owned landfills in the entire state, and Superior was the only municipality that had no garbage fee. As a result, this legislation was only relevant to the City of Superior.
Given that the City of Superior faced a budgetary shortfall in 2016 if this law were not modified, Mayor Hagen and his staff lobbied the state of Wisconsin for an abatement of that law in order for the City to continue to operate the landfill until it could be closed in an orderly fashion. The City’s case was presented to the legislature in March of this year, and the result was a modification of the law that giving Superior the option of a garbage fee.
The City budget for 2015 totaled $27,766,000. As stated above, garbage expenses come under the purview of the Department of Public Works in the landfill enterprise fund, with a total budget of $6.2M. Landfill expenses exceeded revenue in 2015, necessitating a transfer of $500,000 from the general fund to Public Works. If nothing is done to increase revenues, that shortfall will exceed $1.1M in 2016.
Until the past decade, the landfill was not a drag on the City budget, and sometimes operated as a profitable entity. In as much as the landfill was at least a break-even proposition, and often times a profitable operation, this meant that garbage pickup for City residents was being financed by outside contracts with entities such as the WLSSD. Garbage really wasn’t paid for by real estate taxes at all, but instead by the fees collected for garbage generated by non-residents.
However, increased tipping fees that are beyond the control of the City, combined with reduced garbage volume, due to the diversion of recycled materials, have caused the landfill to go from a budgetary surplus to a deficit over the past decade.
Department breakdown of how City of Superior tax dollars are spent
How many of my tax dollars go to the landfill?
Let’s try to put a number to that question, taking 2015 as an example. This year, $500,000 has been transferred from the general fund into the landfill enterprise fund to balance that budget…that is a direct cost to the tax payers. That is a monthly deficit of $41,667. If we assume 10,000 household and small business pickups city-wide, that works out to an annual expense per account of just over $50 per year, or $4.17 per month.
So, that is how much garbage pickup is currently costing City residents and small business now. This money is being taken from the city coffers to fund the landfill rather than for the support of police and fire, or any of the other valued City services. In 2016 that number is projected to more than double to $1.1M, which would cost each resident approximately $9.17 per month through moneys diverted from the general fund.
Now one begins to understand how the City arrived at a proposed rate of $9.75 per month for garbage pick-up. Left unfixed, the City budget will show a shortfall of $707,750 in 2016, effectively erasing an otherwise projected surplus of $403,000.
Is the problem Incompetence or Circumstances?
Mayor Hagen has been quoted on more than one occasion as saying that this is no one’s fault, but instead the culmination of many events that were beyond the control of City government, regardless of who was holding the reins. The benefits of recycling for the environment in general have reduced revenue for the landfill. At the same time, state and federal laws have made managing a landfill more expensive.
The City hired a company, NewGen Solutions, to analyze the city operated landfill, with the mission of determining if it could be managed more effectively and efficiently. The consultant reported back that in their opinion, the landfill was being managed “quite well, and efficiently.” They went on to say that the City did not have a spending problem related to the operation of the landfill, but instead a funding problem. The numbers simply don’t add up to a solvent operation.
When quizzed about this landfill problem, the Mayor responded by saying, “I look upon running a City as though it were a business. We have expenses and revenues, and they need to balance or we’re out of business.”
According to Jean Vito, City Finance Director, the City’s general fund budget for 2016 must be introduced to the Council by September 1st. She went on to say that “should the landfill financial issue not be addressed by then, the subsidy to the landfill will need to be re-instated in the budget, which would drive the general fund into a deficit of over $700K.”
If the final budget shows a deficit of that magnitude, then it would be up to the City Council to reallocate funds per their priorities. On the average, this would require a reduction of City services across the board of approximately 2.5%.
Ultimately, it comes down to the City Council recognizing the 800 pound gorilla in the room. Somebody has to pay for the landfill expense. Depending on how the Council rules on this issue, it will either be those who generate the garbage by paying a monthly fee, or it will fall upon other areas of government where cuts will need to be made in order for the City to submit a balanced 2016 budget by the end of November. We can only hope that all those participating in this decision can put politics aside, and focus on the problem at hand.
Admittedly, this is a very complicated issue, but we hope that by laying out the numbers for the public to sift through, we have better educated the citizens of Superior as to the options that have been laid in front of them. It is the City administration’s charge to submit a balanced budget, and the City council’s job to approve, modify, or reject said budget. In the end however, the budget must balance the services offered.
Explore Superior urges those in positions of authority to make logical decisions based on the realities of the situation, and to put politics aside in pursuit of a solution. We will be watching Tuesday night to see who plays to the audience, and who is devoted to achieving a solution.
Stay tuned for follow-up articles on the Tuesday’s City Council meeting.