City of Springfield

36 Court Street f§ Finance Department

Springfield, MA 01103

To: City Council

From: LeeAnn Pasquini, Budget Director
Date: 4/7/2011
Re: Re-Analysis of Solid Waste Disposal Options After Waste Zero Response
CC: Al Chwalek, Lee Erdmann

Analysis:
This updated analysis uses a revenue amount for the WasteZero proposal that is consistent with
the Graduated Bin System (GBS) proposal. WasteZero has indicated that the price per bag could
be adjusted to generate a desired amount of revenue. This analysis also classifies the payment
from WasteZero ($540,000 annually) to the City as a negative expense rather than classifying it
as revenue as was done in our initial analysis. It was WasteZero's intent that this $540,000 in
"guaranteed savings" be classified as a negative expense.

How does this compare to the initial analysis?

• Expenses - The total expenses for the updated WasteZero proposal are $8,965,895
which is $486,340 less than the GBS proposal.
• Revenues - The initial analysis used WasteZero's figures which included $3.6 million in
costs to the customers. WasteZero has indicated that this was used because they
understood that this was the desired revenue. This second analysis reduces the revenue
generated by customers to be consistent with the GBS proposal.
• Costs to Customers - The annual cost to customers is a range estimated by WasteZero
based on an average of 1.2 bags used per week. The size of the bags used is split 50/50
between the 15 and 30 gallon bags. Based on Waste Zero's bag assumption, this would
be an average annual cost of $52-$84 per year.

By changing how the credit from WasteZero to the City is classified, and adjusting the
revenue originally proposed by WasteZero, I would summarize that the WasteZero program
could save $486K.

Waste Zero has indicated that they are on the State Contract for PAYT programs however the
guarantee is not on the State contract. They have also indicated that the terms of contracts of
this nature are typically 3 years however that would be dependent on some additional details.
Based on the proposal, the City would pay WasteZero an amount equal to the 2010 tipping fee
($3,281,236) each year for the term of the contact with an offset of an annual guarantee from
Waste Zero of $540K. This amount is part of the OTPS expenses on the following page.

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Projected Expense Compared to Projected Revenue:
Initial City Analysis of Second City Analysis of
EXPENSES Graduated Bin System
WasteZero Proposal WasteZero Proposal

PS $ 3,024,030 $ 3,024,030 $ 3,024,030

OTPS $ 5,878,204 $ 6,031,865 $ 6,031,865
WasteZero Guarantee $ (540,000)
Capital (Bins) $ 550,000 $ 450,000 $ 450,000
TOTAL $ 9,452,235 $ 9,505^95 $ 8,965,895

SUMMARY

TOTAL REVENUE $ (3,060,920) $ (4,817,345) $ (3,060,920)

TOTAL EXPENSES $ 9,452,235 $ 9,505,895 $ 8,965,895

Summary of Options:
Initial City Analysis of Second City Analysis of
Graduated Bin System
WasteZero Proposal WasteZero Proposal
Projected Net Cost $ 6,391,315 S 4,688,550 $ 5,904,975
Household cost range $40 -$100 /year $52 -$273 /year $52-$84/year
Annual Tonnage Est 38,000 26,000 26,000

Other concerns / issues to be aware of;

• Ail procurement rules would need to be followed according to Chapter 30B rules.
• The change of implementation from an owner based fee to a resident based fee may be
a challenge to implement and enforce.
• No rebate to customers is proposed, otherwise that would impact the City's net cost.
• Waste Zero has authority to monitor all aspects of the program; Is the City giving Waste
Zero authority to administer the program?

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