Regional landfill loses commercial customer

From Mr. Lynam, who serves on the Refuse District board for Dartmouth and is a member of the Finance Committee,

The Greater New Bedford Regional Refuse District, of which we are half owner, has lost its second largest commercial hauler of waste. This has resulted in the loss of nearly $1.5 mil in yearly revenue - 28% of our commercial income.

Background:
Every two years we go our to bid for commercial tonnage to defray the costs of owning and operating the Regional Land Fill. This round of bidding was for the calendar years 2010 & 2011.

The District Committee has restricted the commercial tonnage to 48,100 tons / yr., a figure designed to extend the land fill's life to the maximum extent while holding the costs to both Dartmouth and New Bedford to reasonable levels. Our second largest largest customer, ABC, failed to bid. Apparently Bourne's land fill operation is under fiscal stress and as a result Bourne offered a rate of around $45 / ton to ABC over a two year period. This rate is in contrast to our market competitive rate of $71 / ton for 2010 and $73 / ton for 2011.

The loss of this major customer represents 21,000 tons / yr or about $1,448,400 { 28% } of our total commercial income of about $3.43 mil / yr . Income from assessments to New Bedford and Dartmouth along with income from methane production and other misc operations is expected to bring in another $1,460,800 as budgeted for FY10. { Dartmouth's assessment for FY10 stands at $109,155 }

The question:
"How do we adjust to absorb this shortfall of $1,448,400 in budgeted FY10 revenue ?"

Solution:
Fortunately the district has been exceptionally, and conservatively, well run for many years. We have the ability to reduce amounts scheduled for reserves in several areas to include Equipment, Land Purchase and Phase #2 construction reserves. This will shave $790K off the needed amount.

Another $335K will come from line item budget reductions in the areas of Security, Legal, Insurance, Recycling, Leachate / Methane maint, Overtime and deferral of the yearly scheduled payment into the GASB45 reserve. This latter reduction is of some concern to us all, and will be one of the first areas to be reinstated should we be successful in increasing tonnage from other firms.

Toward the aim of increasing tonnage, the district has made overtures to our largest customer, Frades, for additional tonnage ...

... at the slightly reduced rate of $68 / ton. They have agreed to another 2,500 tons at the reduced rate while suggesting that they may add as much as 6,000 additional tons under this rate. This will contribute a minimum of $170K. Additionally we have held the 2010 rate of $71 / ton for 2011 as well.

We also have a 'Gate Rate' which is the rate other haulers pay that are not under long term contract. This rate was $95 / ton and currently represents only about $4,500 / yr. in income. We voted to reduce that "Gate Rate " to $75 / ton in order to encourage additional tonnage. Ongoing efforts are underway with other large haulers to fill the remaining void and we are confident that it can be done. If not, we have ample reserves that can be brought to bear. Of course the use of reserves is a short term solution that can not continue into FY11.

The FY11 operating budget will be designed and balanced assuming the total loss of the ABC tonnage.

Bottom Line:
NO increase in Dartmouth's or New Bedford's assessment is anticipated for FY10. As a committee we will reassess the situation in the first quarter of 2010 as to where we are, what progress has been made in acquiring additional tonnage and just where the operating budgets stand.

Greg