Background
At the request of the Board Facilities Subcommittee, staff sought Board direction on July 26, 2016, on whether to begin a competitive bid process to obtain contract(s) for an assessment of the Yolo County Central Landfill. Currently, the landfill is owned and operated by the County. The purpose of the assessment would be to determine the feasibility and potential return on investment of a sale or long-term lease of the landfill. It is estimated the cost for an assessment (market evaluation, legal analysis, and identification of long-term liabilities) will range up to, and possibly over, $250,000. The Board of Supervisors requested additional staff analysis, more information on other landfill sales/leases, identification of future opportunities and staff’s recommendation.
See Att. A. for current landfill data.
Local Jurisdictions’ Interests & Programs Supporting the Strategic Plan Goal: Sustainable Environment
In 1989, AB 939 mandated local jurisdictions divert a minimum of 50% of their waste stream from disposal. In 2011, AB 341 increased the diversion rate to 75% waste by 2020. Currently, all Yolo County jurisdictions are meeting and exceeding the 50% diversion rate (2014 estimates: unincorporated area = 79%; cities = 57-72%). To obtain these diversion rates and operate the landfill as efficiently and effectively as possible (based on 1999 outside evaluation and updated fiscal analysis model in 2005), the following programs have been put in place:
- Negotiated agreements with cities and out-of-county waste haulers to ensure enough waste is brought to landfill to operate efficiently, keep prices low and maintain diversion programs (see statistics in Attachment A)
- Current landfill operations in support of State mandates and Sustainable Environment goal include:
- Landfill Gas to Electricity (power sold to SMUD)
- Construction and Demolition Debris (75% diverted, 25% above mandate)
- Greenwaste & Wood Recycling (used for soil amendment, biomass fuel, biocover)
- Liquid Waste Disposal (~7,000 septic tanks in Yolo County)
- Hazardous Waste Programs (includes free pick-up for seniors/disabled and reuse facility)
- Agriculture/Rural Programs (tire amnesty, ag plastics, oil & filter recycling)
- Electronic Asset Recovery
- Mattress Recycling
- Clarksburg Organics Pilot
- Past research conducted through over $5 million in grants and partnerships with Federal, State, local, and non-profit agencies and universities:
- Methane enhancement by accelerated anaerobic composting
- Project to increase energy production and reduce greenhouse gases
- Collaborate research with State and local agencies
- EPA eXcellence and Leadership project
- Bioreactor landfill
- Anaerobic digestion or organic waste
- Aerobic composting of organic waste
- Biocover to reduce landfill gas fugitive emissions
- Waste to energy
- Engineering application of waste used tires
- Waste gasification
- Direct measurement of landfill gas collection efficiency
- Food waste anaerobic digestion
- Thermochemical conversion
- Biochemical conversion
- Combination Process
Future Programs & Opportunity Costs
The below represents current mandates, as well as currently identified opportunities to meet many of the objectives in the Board’s Strategic Plan goal of a “Sustainable Environment”. Privatization of the landfill could result in higher costs to meet mandates, limitations in the manner in which mandates are met and lost opportunities for innovation and research.
- 75% waste diversion by 2020 (AB 341)
- Reduction of greenhouse gas emissions (AB 32)
- California Renewable Portfolio Standards
- State Bioenergy Goals (40% by 2020, 75% by 2050)
- Reduced dependency on fossil fuel
- Changing regulatory demands and controlling costs
- Clarksburg organics collection program
- BioGreen Digestor (organic waste diverted; energy and compost produced; carbon and air emissions, material handling, parasitic load for operation and capital & operation costs reduced)
- Pharmaceuticals diverted
- Waste to energy
County & Local Jurisdiction Mandates and Liabilities
In addition to State and Federal governments’ numerous legal mandates, there are several liabilities associated with operating a municipal landfill:
- State diversion requirements must be met by all jurisdictions, which is currently 50% and measured by tons of waste disposed per year (pounds per person or pounds per employee) for each jurisdiction. The landfill provides for significant diversion for all jurisdictions. In 2015-16, the landfill accepted 533,181 tons, diverted 341,840 tons (64%) and disposed of 191,341 tons (36%).
- Public Resource Code §41750. Every five years, each county and city must submit and update a countywide integrated waste management plan, which includes all of the following:
- Summary of significant waste management problems facing the county, statement of goals and objectives set forth by the countywide task force and an overview of specific steps that will be taken by agencies (acting independently and in concert) to achieve objectives
- City and unincorporated county source reduction and recycling elements
- City and unincorporated county household hazardous waste elements
- Countywide siting element
- City and unincorporated county non-disposal facility elements
- Environmental liabilities are the potential impacts to the environment from wastes disposed of in the landfill. This includes surface, storm, and ground water quality impacts, as well as air quality impacts. Note: the Corrective Action Trust Fund, which is required to cover mitigation costs for unforeseen releases of waste materials to the environment, has a current balance of $1,046,343 (current minimum required balance is $357,373, therefore currently fully funded).
- Hazardous Waste Facility accepts materials from residents and small businesses located within the county which are stored and then transferred for reuse, recycling or disposal. The County is liable for environmental impacts from operation and closure of the facility, as well as the disposal of the hazardous materials into perpetuity. Only 20% is ultimately disposed of, which is nearly all (98%) treated wood waste with small amounts (1.5%) of asbestos.
- Gas-to-Energy Plant (purchase currently in progress) includes future liabilities related to gas collection, plant operations, and energy delivery.
- Waste Management Unit Closure/Post-Closure and Corrective Action Liabilities.
- For the entire landfill, 2015 closure cost estimate was $73,594,288 and post-closure cost (for 30 years) $18,990,762; total = $92,585,050.
- Closure liability for constructed but not yet closed waste management units 4, 5, 6A, 6B, 6C and 6D (1, 2 and 3 have been closed) in 2016 dollars is $100,000 per acre; total = $12,400,000.
- Current balance in the Closure/Post-Closure Trust Fund is $17,226,425.Current minimum required balance is based on the percentage of landfill space filled and equals $15,720,438. Therefore, trust fund is fully funded for the current disposed waste volume.
Outcomes of Other County/City Privatization Efforts
Below are overviews of previous attempted sales/leases of publicly owned landfills. While the terms and conditions of each proposed or executed transaction are unique, the underlying motivations for the municipality pursuing a sale/lease are similar: strained municipal budgets; fiscally unsustainable landfill business models which required General Fund subsidies; and concerns over immediate or long term environmental issues and liabilities.
Sonoma County. The county owned and operated their landfill up until 2005, when it was closed due to groundwater contamination. In 2007, the county placed the landfill up for sale and researched consultants to appraise their landfill and four transfer stations. The appraisal was never conducted and following a lengthy RFP process, the county entered into negotiations with Republic Services. The final negotiated deal included a purchase price of $1 and annual royalty payments of $2.73 million for 20 years, and reduced the county's liability for the landfill's closure and post closure costs. In October of 2009, after almost three years of staff time and county funds spent on negotiating the sale of the landfill to Republic Services, the Sonoma County Board ultimately chose to abandon the sale. The landfill was reopened in 2010 and permits were obtained to continue operation for 25-30 years.
In 2015, Sonoma County entered into a 25-year agreement with Republic Services under which the county retains ownership of the system’s property and infrastructure while Republic Services builds new infrastructure, indemnifies in perpetuity the cities and county, and is responsible for closure and post-closure costs in exchange for the waste stream from the county and all of the cities. Additionally, the agreement allows for new waste diversions and ties rate increases to Consumer Price Index increases with a maximum annual rate increase cap at 3.5% (note: rate caps do not apply to green waste due to legal and regulatory complications requiring green waste be hauled out of county due to Clean Water Act violations of the existing composting operation at the landfill, resulting in green waste collection fees doubling). Republic Services will also pay the county a concession payment. The county intends to use concession payments to pay closure costs of previously closed landfills. The amount of the concession payment has yet to be determined. An FAQ on the lease is attached (Att. B).
City of San Diego. The City of San Diego operates a landfill on leased property owned by the U.S. Navy. In 2010, the city explored the option to sell the landfill. At the time, the city was facing a $56 million budget deficit and city officials were interested in means to increase revenue. The city spent 10 months and $500,000 in consultant fees pursuing this sale with three separate private waste firms, with none submitting an offer. One of the primary reasons given by the private firms for not bidding on the landfill was the city’s requirement that they assume all environmental liability, including landfill closure and post closure maintenance, potential complications with the lease/ownership arrangement with the Navy, and the minimal capacity remaining. The city ultimately opted for “managed competition” to reduce costs at the landfill, a process by which both private entities and public employees bid to provide municipal services. The city ultimately chose the employee proposal providing an estimated $3.5 million in annual savings.
County of Riverside. In 2013, Riverside County considered privatizing the county-owned landfill system with the intent that revenue derived from the lease or sale could be used to fund public safety programs such as a jail expansion. Ultimately, the Board of Supervisors voted against proceeding with an RFQ citing concerns over increased tipping fees and previous landfill sales, such as San Diego County, which ultimately generated less revenue than anticipated. Instead, the Board directed staff to identify landfill enterprise fund reserves and revenue streams available to securitize a $40-60 million fund for capital improvements to the county jail system. Had the Board proceeded with the RFQ, staff estimated transaction costs associated with the sale could be upwards of $5 million in staff time and consulting services.
While the Board did not proceed with the RFQ, the proposed RFQ had stipulated that any transaction include the following:
- Maintenance of the existing disposal rate structure
- Long-term rate stability
- Transfer of closure, corrective action and post-closure liabilities and obligations (including financial assurance obligations) related to the landfill system (whether active, inactive or closed) to a private entity
- Commitment to accept all municipal solid waste generated in the cities and unincorporated areas of the county
- Commitment to continue the existing recycling programs, including the acceptance and proper handling of appliances and electronic waste
- Maintenance of the landfills' long-term disposal capacity for in-county generated municipal solid waste at current tipping fees with CPI-indexed escalation
- Continuance of on-going compliance programs to meet or exceed regulatory requirements for all activities within the county solid waste system
- Provision of as many as county employees at the landfill reasonable opportunity to obtain employment with a new operator
The county had previously retained a consultant to appraise the county’s landfill system. The entire system appraised for as low as $10 million and up to $127 million depending on discount rate and tonnage growth projections. The landfill appraisal was depressed given that 32 of the 38 landfill sites are inactive. As such, an appraisal of just the two largest and most active landfills in the system appraised from $82 to $330 million depending on discount rate and tonnage growth projections. Additionally, staff appraised the landfill system’s unfunded liabilities at $56 million.
County of San Diego. Also included in Riverside County’s analysis of the potential sale was a case study on the County of San Diego’s 1997 sale of their landfills to Republic Services due to ongoing regulatory and debt financing issues necessitating annual General Fund subsidies (Att. C). As the attached states, while the initial sale of the San Diego County landfills generated revenue for the General Fund, long-term closure costs necessitated that the county transfer back a portion of the funding to cover these costs. Additionally, non-contract tipping fees doubled.
Staff Recommendation
Staff’s recommendation is not to proceed with further assessment of privatizing the landfill. In years past, landfill staff have researched and discussed the risks and benefits involved in private operation of the landfill. While private operation may initially result in financial gain for the County, it would also lead to a loss of control and operational flexibility that currently benefits the residents, businesses, and jurisdictions in Yolo County. A positive return on investment will likely be diminished in attempting to address long-term liabilities and ensuring the continuance of programs and services that support the Board’s “Sustainable Environment” goal and the related goals of our partner jurisdictions. Similarly, future revenue and Sustainable Environment-related opportunities may be lost. However, while not staff’s recommendation, the only way to quantify costs and lost opportunities would be through a professional assessment. |