New Legal Opinion a Major Blow to Solid Waste Funding Plan

Transfer station on Orcas may be the only one to remain open

By Stan Matthews
County Communications Program Manager

A new legal opinion from Prosecutor Randall Gaylord stunned the County Council and the County’s financially-troubled solid waste utility Tuesday, March 2. In a briefing during the regular Council session, Gaylord said – in light of court cases – the option of assessing a flat solid waste utility fee on each parcel of land in the County should be “taken off the table.”

After several weeks of discussion, and at the urging of the County’s Solid Waste Advisory Committee, a majority of the Council had appeared willing to strongly consider a parcel fee to head off a growing financial crisis at the utility.

Public Works Director Jon Shannon described the utility’s financial status to the Council Tuesday saying, “The cash flow issue literally leaves me in a place where I’m not willing to authorize the expenditures. We’re $700,000 in the hole and we have contracted work where the bills are coming in.” He described the unexpected legal opinion as “an atomic bomb.”

The utility is currently funded almost entirely from fees based on the weight or volume of garbage handled. In the face of increased costs to fund mandated capital improvements to meet state operating requirements on San Juan and Orcas Islands, the tonnage of solid waste being handled has dropped nearly 20 percent from 2008 to 2009, plunging the utility into the red.

In the short term, with parcel fees off the table, the Council and utility are looking to raise the money needed to continue solid waste operations through a combination of fee increases, borrowing and possible further service reductions.

Shannon expressed serious concern that additional increases in “tipping fees” – which are already the highest in the state – could cause further losses of volume, such as having large haulers opt to take their loads directly to facilities on the mainland. He warned that this could put San Juan County’s utility into a “death spiral” with higher rates actually producing less revenue because of the loss of volume.

“I believe that if we borrow the $2 million we need [to meet cash flow and capital requirements] and promise to pay it back with a $100 a ton higher tipping fee, the system will collapse,” he said. At this point the only non-fee related revenue source that has been identified is a property tax levy, which would require voter approval and not produce any revenue until 2011.

“It’s pretty shocking news for all of us,” Council Member Rich Peterson said during the discussion Tuesday. “We have two elections coming up this year. We need to get something on the soonest ballot we can.”

In the meantime, the Council has asked Shannon to analyze the potential cost savings of closing the two of the three transfer stations, most likely those on San Juan and Lopez Islands and directing all solid waste and recycling to the transfer station on Orcas. Shannon expects that analysis to take at least two months. Shannon cautioned that it is too soon for people to think of a one-station system as the likely outcome. In February, the Council, by consensus, expressed a policy preference to continue operating three stations open.

For the immediate future, Shannon is putting together a short term survival plan to discuss with the Council at its March 9 meeting. He said the plan will likely include elimination or postponement of all expenditures that aren’t immediately required to keep the utility in operation. His presentation will also include recommendations for the utility’s tipping rates and other fees that the Council is scheduled to adopt on March 30.

The idea, he said, is to buy time until the Council determines if it can and should raise additional revenue through property taxes or other means; or if further cuts in service need to be made. The utility has reduced operations at the Orcas and San Juan Island transfer stations by two days per week, since September 2009.

Shannon offered some perspective on the cost of providing the current level of service, “We have the same number of transfer stations as Snohomish County. Snohomish County collects 1 million tons of garbage a year and they collect revenue on it. We have three transfer stations and we generate 10,000 tons. We do everything in triplicate on a customer base that can’t support it using the traditional ways governments fund this.”

The solid waste utility’s financial problems are just a part of a problem county-wide. Even after two years of decreasing budgets and the adoption of a levy lid-lift last November, the County Council learned last month that it will need to adopt nearly $300,000 in additional cuts to balance the current year’s operating budget due to an additional 2009 revenue shortfall.