[EQAB-list] recomputed benefit:cost of recycling rewards
Robert G Kennedy III, PE
robot at ultimax.com
Fri Sep 5 16:32:51 EDT 2008
Executive Summary
Benefit:Cost Analysis of Single-Stream Recycling Rewards Program
To Individuals
~$230 annual benefit
$ 24 annual marginal cost
~10:1 benefit:cost ratio
To the City
~$421K annual benefit
$ 0 annual marginal cost
infinite benefit:cost ratio
EQAB recommended on Sep 4th to City Council that the City proceed with
Single-Stream Rewards program.
***********************************************************************
MARGINAL COST TO HOUSEHOLDER
----------------------------
increase in trash/util fee per household: $5.00 --> $7.00 per month
increased fees to City: $2.00 x 12 = $24 per year.
BENEFIT TO HOUSEHOLDER
----------------------
Givens: 11,645 households generating 14,000 tons of garbage per year.
imputed average: 1.2 tons trash per house per year (seems low)
present diversion (i.e. recycling) rate: 10%, or 0.12 tons,
or 240 lbs.
Expected diversion rate due to single-stream recycling: 33%, or 792 lbs.
difference = the full 792 lbs, because households are not paid now for
their recycled material.
*
Monopoly money earned by householders:
$0.25 per lb (2.5 points per lb x estimated value of 10 cents per pt,
from the website www.recyclebank.com ) times 792 lbs = $198.00/year
*
Estimated proportion of households who take cardboard and paper and
other plastics to the recycle center: 30%, based on:
- observed 100% probability of seeing at least one other Oak Ridger at
the recycle center at any given time,
- assumed stochastic process,
- 67 hours per week operation,
- 4.2 weeks per month,
- 5-minute span time to drop off stuff,
- 11,645 households, and
- 2 adults of driving age per household.
Direct cost to green volunteers for drop-off at recycle center:
1 round trip per month x 10 miles ea.way x 20 mpg x $4.00/gal = $48/yr, OR
1 round trip per month x 10 miles ea.way x $0.585/mile GSA rate = $140/yr.
assume time is free, though economists value leisure time @ ~$3/hr.
arithmetic average of both methods: $94/yr.
times proportion of green volunteers, 30%.
average household benefit: $28/yr.
*
Benefit to average household of reduced expense to City (see below) in
the form of lower property tax and/or user fees: $2-3/yr.
*
Total benefit: $198 + $28 + $2-3 = $228/yr
INDIVIDUAL BENEFIT:COST RATIO is $228 : $24 or approx 10:1
***********************************************************************
MARGINAL COST TO CITY
---------------------
zero (?).
BENEFIT TO CITY
---------------
Givens: 11,645 households generating 14,000 tons of garbage per year.
present diversion (i.e. recycling) rate: 10%, or 1400 tons.
Expected improved diversion rate due to single-stream recycling: 33%,
or 4600 tons.
difference +3200 tons.
present tipping fee @ A.C. landfill: $20 per ton, or a penny a pound.
assume savings to Anderson County passed thru to City of Oak Ridge.
reduced tipping cost to City due to diversion: $64,000 per year.
*
Avoided cost of exceeding federal landfill diversion mandates: minimal
today, may not be so forever.
*
Since burying trash in a landfill in effect sequesters most of the
carbon for a long time, carbon taxes are unlikely to increase the cost
of dumping.
*
Increased efficiency of collecting recyclable materials will accrue to
somebody, but I don't have enough information right now to say to whom.
Current method of curbside sorting requires 1 driver/sorter plus 1
truck, with engine running, and takes 60-90 seconds per week per
household, not counting trips to the landfill. Assume some smart
OpsRsrch person minimizes deadheading. Note they're only recovering
10% recyclables now.
Assume fully-burdened cost of driver/sorter is $30 per hour.
Assume mid-size truck diesel engine consuming 5 gallons fuel per hour,
or $22 per hour.
Assume 200% add-on for amortization, insurance, and maintenance of the
vehicle, or $44 per hour.
Total cost of current method: $96 per hour, or $1.60-$2.40 per week
per household. Say $2 per week, or $8.40 per month.
By observation, the actual *garbage* pickup goes at least twice as
fast since there's no sorting. So figure a buck a week, or $4.20 per
house per month for that.
Estimate for combined garbage & recycling: $12.60, minus whatever WCI
manages to earn from selling the recyclable material into today's
red-hot commodities market.
This is in the ballpark as the known contract cost of $11.22 per
household month, so the assumptions look reasonable.
New method of robotic scan/pickup/dump&crush shouldn't take more than
30 seconds per household, including transit. This should drop the
collection cost to under a dollar per household per week.
Method of trash pickup won't change; it'll still be about a buck a week.
So the estimated cost of the combined new method should drop to about
$8 per month per household, or ~$100 per year. The difference of ~$50
per year should show up in somebody's pocket somehow.
*
Increase in pickup fee per household: $5.00 --> $7.00 per month
increased trash fees to City: $2.00 x 12 x 11645 = $279,480 per year.
*
Monopoly money earned by householders: $198.00/year
assume 50% of Monopoly money is redeemed locally (may be 100%).
assume velocity of money is 3-7 turnovers per year, say 5 average.
assume 1/e "leakage" per turnover.
sum series [1-(1/e)]^0 + [1-(1/e)]^1 + [1-(1/e)]^2 + [1-(1/e)]^3 + [1-(1/e)]^4
is 1 + 0.63 + 0.40 + 0.25 + 0.16 = 2.44
City share of sales tax: 2.75%
increased sales tax collection: 11,645 x $198.00 x 50% x 2.44 x 2.75% = $77356
[see Note 1]
*
Total benefit to city: $64000 + $279480 + $77356 = $420,836 per year.
[see Note 2]
CITY BENEFIT:COST RATIO is $421K : $0 or infinite
***********************************************************************
Note 1. The increased rate of diverting trash from landfill, from
which all the benefits flow, occurs because residents are rewarded for
recycling what they formerly threw away. It shouldn't matter if
someone else is going to make money on your garbage, if you were going
to throw it away anyway. The funny-money which the householders will
be spending is *new* money, therefore the increased sales tax is also
*new* money for the City. The source from which it derives was
originally being thrown away -- the folks at the Recycle Bank have
figured out how to monetize this previously wasted resource.
So this program is an absolute good.
Note 2. However, a benefit to the City in the form of reduced
operating expense should eventually show up to the taxpayer as reduced
property tax.
City budget is ~$144M.
Assume City budget 100% funded by gross revenue (i.e. no deficit
spending), composed of business taxes, sales taxes, electricity &
water sales, FedGov PILT, user fees/fines, and residential property tax.
Based on my average 2000-ft^2 house, and average $800 tax bill, I
estimate residental property tax is ~6% of gross City revenue.
Therefore benefit to City should work out to about $2-3 benefit per
year per household.
--
Robert G Kennedy III, PE
www.ultimax.com
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