Friday, May 25, 2007

Quagmire - Pronunciation: 'kwag-"mI(-&)r, 'kwäg- Function: noun 2 : a difficult, precarious, or entrapping position - Are we in one?

I requested permission from Richard Breuer to post this thread from his blog. The original as well as the rest of his website can be found here:

Trash - it's not over yet.

Council voted Wednesday night to keep trash collection in-house. What Council did not do is address the looming six-figure deficit that faces the trash fund.

Read on.

According to the Borough’s approved budget, the total annual costs of trash services are $1,438,562. This figure is made up of direct costs of $1,191,548 and allocated overhead of $247,014. According to the spreadsheet presented by the Finance Director on Wednesday night, the direct costs are actually up a bit, to $1,223,842, bringing the total to $1,470,856. The budget also includes about $129,600 in miscellaneous revenue (sale of scrap, grants, and so on), so that the net total cost drops to $1,308,962 or $1,341,256.

In any event, the net cost per customer is either $253.58 or $259.83 per year.

Now, the problem is that the Borough has been billing the service at the rate of $221 per year ($55.25 per quarter). What do you think happens when you price something at $221 when it costs you $254–260? You lose money.

The short answer is that if the Borough keeps charging $55.25 per quarter, the trash fund will run a deficit of $168K–$200K this year. Since there is only half a year left to correct the underpricing, the needed trash fee increase will, of course, be much larger than it would have been had it been priced correctly at the beginning of the year.

The quarterly fee will need to go to $71.54–$74.67 (increase of 29–35%) for the balance of the year to plug the gap.

By the way, if you think that contracting with Mascaro would have solved this problem, think again. Mascaro quoted $269 or so per customer. This did not include any additional direct costs (such as billing and collection expenses) that the Borough would incur. More importantly, it did not include the $247K in overhead that was allocated to trash collection. That overhead allocation amounts to $47.85 per customer. The underlying overhead expense, which is allocated to all Borough departments, is not eliminated by outsourcing. The $247K would have remained a Borough cost, whether or not it was recovered through the trash fee.

The real problem is that the Borough Manager concealed the problem in the original 2007 budget, counting on the mid-year introduction of PAYT as the ‘stealth’ means to saddle trash customers with a higher fee.

The question now is what will the Council do about the trash fee.


Thank you, Richard, this issue certainly isn't over.

1 comment:

Anonymous said...

I posted this on another blog, but it seems appropriate here as well.

Check into the fees in other areas, with other trash haulers.

I currently use AJ Blosenski. The fees are $74/quarter and they are the cheapest around. Your surrounding communities do't mandate who collects trash. It is the choice of the individual homeowner.

AJ Blosenski allows 8 bags, with bulk pick up designated one day each month. $74/quarter breaks down to roughly $6/week. They don't throw your containers, don't miss a week here and there, don't forget to pick up your recycling items like several other companies have done. By far they are the best I've found, and for the rest of us, the price is good.

Bottom line- stop whining Phoenixville. You've been getting away with cheap trash pick up for a long time now. Your surrounding neighbors have been paying much higher fees for year. Consider yourself lucky to date.