Sweet Home customers are likely to see a new method of structuring garbage collection rate increases, based on the state’s Consumer Price Index, starting with a 2.1 percent increase in the process of approval by the City Council.
The council held the first reading Tuesday, June 27, of an ordinance that would change the way increases are instituted to an automatic annual rate adjustment that will be based on changes in the CPI.
Currently, the city’s contract with its trash collection franchisee, Sweet Home Sanitation requires the company to request a rate adjustment when deemed necessary.
City Manager Ray Towry told council members that the CPI-based structure is “an absolutely normal practice.”that has been used in the communities in which he previously has lived and worked.
“It gives people predictability and the ability to budget far out in advance that way, including businesses,” Towry said. “They can forecast their expenses that way.”
He said the city’s administration and Finance Committee had recommended that the proposal move to the council.
District Manager Josh Metcalf noted that it has been two years since the last rate increase requested by Sweet Home Sanitation, which is owned and operated by Waste Connections Inc.
“Since the last time we were before Council, the Consumer Price Index has actually increased by 3.2 percent,”he said, adding that “tonight we are simply seeking a 2.1 percent increase, which is equivalent to the increase that was experienced in 2016.”
He told the council that the increase for the average customer, who uses a 35-gallon trash cart, would be 50 cents per month.
Metcalf echoed Towry’s statement that it is common practice in other municipalities.
In addition to predictability for customers, he said, “it also eliminates the need for any potential catch-up increases or adjustments after having gone multiple years without any rate adjustment.”
Councilor Dave Trask said he was “not a big fan of this.”
He said that’s because “I don’t know what the CPI is going to do next year, or the year after that, or the year after that. And I don’t know the history of the CPI the last 20 years or the last five years. And so, if, by some miracle, it went up 5 percent next year, you gonna take 5 percent.”
Metcalf said that would be the case. “The idea of adjusting by the CPI is both positive and negative,” he said. “If it went up 5 percent, that would suggest that the cost of goods and services associated with our businesses are increasing at that rate.
“But on the other side, if it were to go negative, you should also expect a price decrease.”
Council member Susan Coleman asked if the CPI has ever gone negative.
Metcalf said he didn’t know, “honestly.”
The CPI is kind of a reflection of the robust nature, or lack thereof, of the economy, he said.
In the last several years it has remained nearly flat as the economy petered out, so to speak, there was little or no movement in the CPI, Metcalf said. Over the last two years, he said, the CPI increase has been 3.2 percent., which is “actually kind of a good thing, to take a look that the economy is actually growing – there is a need for an increase in the price of goods and services.”
“But, Councilor Trask, back to your your question, if it were to increase 5 percent, we would be seeking a 5 percent increase.”
The adjustment would be made to the following year’s rate, he said.
Mayor Greg Mahler said he would be more comfortable with a cap, observing that he supported Sweet Home Sanitation’s last request for a rate increase and “took a beating” for that when other councilors opposed it.
The contract would stipulate that the annual price adjustment, calculated in July, be based on the CPI for the previous 12 months, Metcalf said.
Mahler also wondered which CPI would be used to calculate Sweet Home’s rate.
“You’re going to say you’re monitoring the CPI, or is the city going to do that.”
SHS Operations Manager Scott Gagner and Metcalf told the council the most localized index in Oregon is the Portland-Salem Index, published by the federal government’s Bureau of Labor and Statistics.
“It’s the same index utilized by any other municipality in Oregon,” Metcalf said.
Mahler said he’s heard that CPI numbers vary among municipalities.
“Albany’s has been higher than Corvallis’ and Lebanon’s.”
Metcalf said some communities’ rates take other factors into account.
“There are clauses that allow for emergency increases – say, fuel spikes, $20 a gallon – there’s some sort of shortage and crisis with fuel. That would allow a franchisee to seek an emergency increase in addition to a CPI. There are a number of things that potentially come into play in the variety of franchise agreements that exist.
He said his company provides Brownsville, which operates under a CPI-based agreement, with a yearly update and a personal visit to the council to report on where things are going with the contract. In addition to the three mentioned by Mahler, other local cities that use CPI-based waste management agreements include Halsey, Tangent, Millersburg, Harrisburg, Philomath and Scio, according to a list of such municipalities provided by Metcalf.
Gagner said the CPI over the past “10 to 15 years” has ranged from a high of 3.2 percent to a low of -0.7, with an average of 1.7 to 1.8 percent.
“It’s been relatively stable,” he said.
Councilor Diane Gerson expressed concerns about the six-year duration of the agreement.
“At the end of six years, are you going to come back and talk to us again, or do we stay with that CPI for the six years or what?”
Metcalf reminded her that it is an annual adjustment, and said the contract will be renewed every year for another six-year term.
City Attorney Robert Snyder called it a “rolling” six years.”
Either party has the discretion to give notice to end the agreement, Metcalf said.
He told council members that Sweet Home Sanitation, like most utilities, prefers a “smaller, more frequent” model of rate increases, “which is easier to adjust to versus going several years, and a utility has to seek a larger increase. We’ve always found that our customers are able to adjust more easily to that.”
Responding to a concern from a councilor, he said that businesses, which pay higher rates, can adjust to lower service levels if their needs change or affordability becomes a problem.
A majority of councilors agreed that a cap wasn’t necessary, so they voted unanimously to approve the first reading of the ordinance. A second reading will be during the council’s next regular meeting on July 11.