Mill Valley residents could see their garbage rates increase by nearly 14 percent in July, as Mill Valley Refuse Service is looking for its second consecutive double-digit rate increase, citing a variety of economic factors like higher fuel costs and dump fees.
The company took its case to the Mill Valley City Council Monday night, and while the council praised the company for its quality service and appeared open to approving the rate hike when it comes up for a vote in June, it also cast a skeptical eye towards Mill Valley Refuse’s financial health and its hiking of rates at a time when and as well.
The rate hike will result in an increase of around $4.50 per Mill Valley household, with the cost of a typical customer’s package of a 32-gallon garbage can, along with recycling and compost service, rising to $36.61, the city said.
Mill Valley Refuse Service Principal Jim Iavarone blamed a number of factors for the rate hike request, including higher fuel costs, rising workers compensation costs and larger fees from the Redwood Landfill where its trash goes. The company estimated that it will spend $240,000 more in annual diesel fuel costs and $403,000 because of a rate hike from Redwood Landfill, along with a 12 percent rise in the cost of workers compensation insurance.
Councilwoman Shawn Marshall noted that the company’s employee costs of $5.5 million equaled nearly half of its total operating budget. The company currently pays salary, pension and full medical benefits for all its employees.
“Is there anything that can be done about that?” she asked. “It’s a huge chunk.”
Iavarone said that his company may have been too generous in the past and was late in holding the line on salary and benefits increases, as many other companies and public entities have had to do in recent years.
But while those costs represented the bulk of the nearly 14 percent rate hike request, much of the meeting was spent on an unfortunate irony.
When Mill Valley Refuse sought its 11.5 percent rate increase in 2010, it said customers could make up for the higher rate by diverting some of their garbage to the and thus downgrading their service to smaller, cheaper garbage can.
One year later, however, Iavarone said the company is losing money because customers are downgrading their garbage service as they recycle and compost more of their waste.
“I came in here tonight quite concerned because I felt like there was a bait and switch from last year,” said Councilman Andy Berman.
Iavarone said between March 25 and when the company launched its compost service last August, Mill Valley Refuse has collected 552 fewer tons of trash and 1.377 more tons of compost, including both food and yard waste.
“This is like during the water drought, where we were told to conserve our water and they came back the next year and wanted to increase the water rate,” Mayor Ken Wachtel said. “Everybody was conserving water and they weren’t making as much money.”
The company estimated that it has lost $120,000 due to that migration of customers away from revenue-generating trash service.
Iavarone, whose company provides waste collection for Mill Valley and the unincorporated areas of Alto, Homestead Valley, Strawberry and Almonte (as well as Belvedere, Corte Madera and Tiburon), said “driving a truck down a street and picking up a 20-gallon can doesn’t cost us any less than picking up a 32-gallon can. But we’re going to get paid less for it.”
That problem is exacerbated by the fact that Redwood charges higher costs to process recycling and compost than it does garbage because the process is more intensive, Iavarone said.
That trend – less revenue from garbage service and higher costs for recycling and composting waste - is an inherent flaw in the business model of Mill Valley Refuse and the larger waste management industry, said local resident Ken Brooks.
“The business model that there will be more and more garbage each year is over,” Brooks said. “The business model needs to get looked at before you just find yourself back here next year for another discussion about a rate increase.”
Iavarone said the company is working on optimizing its routes and may end up eliminating some trash because of the “migration” of customers producing less garbage and more recycling and green waste. Such a move would reduce its operational costs, he said.
“If you’re picking up less trash, ultimately you have to consolidate trash routes,” he said.
“The future of your business looks like it could be increasingly declining waste quantities,” Moulton-Peters said.