2Printed on paper that contains at least 30 percent postconsumer fiber.
The Five Major FCA Principles

FCA embodies several key concepts that distinguish it from cash accounting techniques. The following list highlights the five basic tenets of FCA, all of which are used,

to some degree, in the case studies.

1. Accounting for costs rather than outlays. An outlay is an expenditure of cash to

acquire or use a resource. A cost is the dollar value of the resource as it is used. For

example, an outlay is made when a collection truck is purchased, but the cost of the

truck is incurred over its active life (e.g., 10 years). The cost of the truck needs to be

allocated over the period of its use because every year of use contributes to the deterioration of the truck's value.

2. Accounting for hidden costs. With FCA, the value of goods and services is reflected

as a cost even if no cash outlay is involved. A community might receive a grant from

a state, for example, to purchase solid waste equipment. This equipment has value,

even though the community did not pay for it in cash. The equipment, therefore,

should be valued in an FCA analysis.

3. Accounting for overhead and indirect costs to individual solid waste services. FCA

accounts for all overhead and indirect costs, including those that are shared with

other public agencies. Overhead and indirect costs might include administrative support, billing, data processing, legal services, and purchasing. 

4. Accounting for past and future costs. FCA includes past and future costs that often

do not appear on annual budgets under cash accounting systems. Past (or upfront)

costs are initial investments necessary to implement MSW services such as the acquisition of vehicles, equipment, or facilities. Future (or back-end) costs are costs that

will be incurred to complete MSW operations such as landfill closure and postclosure

care and postemployment health and retirement benefits.

5. Accounting for costs according to activities or paths. There are two ways of disaggregating costs for an entire MSW system. You can focus on the activities that are

the building blocks of the system or the paths that MSW follows in the course of

integrated solid waste management (i.e., the point of generation through processing

and ultimate disposition). Activities include waste collection, operation of transfer

stations, transport, waste processing and/or disposal, and sale of by-products. MSW

paths include recycling, composting, waste-to-energy, and land disposal. Both the

path and the activity ways of looking at MSW costs can be useful. Understanding the

costs of each MSW activity often will be necessary for compiling the costs of the

entire system and helps you evaluate whether to provide a service yourself or contract out for it. However, in considering changes that affect how much MSW ends up

being recycled, composted, converted to energy, or landfilled—you should focus on

the costs of the different paths. Understanding the full costs of each path is an essential first step in discussing whether to shift the flows of MSW one way or another.
Table of Contents

1. INTRODUCTION1

2. BROWARD COUNTY, FLORIDA5

Introduction5

Background5

FCA in Broward County7

FCA in Action: Balancing Costs and 

Financing of Long-Term Investments8

Lessons Learned9

3. CITY OF COLUMBIA, MISSOURI 14

Introduction 14

Background 14

FCA in Columbia 15

FCA in Action: Developing Cost-Based Prices for 

Services and Customer Groups 17

Lessons Learned 18

4. CITY OF GLENDALE, ARIZONA 23

Introduction 23

Background 23

FCA in Glendale 24

FCA in Action: Analyzing Options for Residential Rate Relief 25

Lessons Learned 25

5. CITY OF INDIANAPOLIS, INDIANA 29

Introduction 29

Background 29

FCA in Indianapolis 30

FCA in Action: Developing Competitive Public Solid Waste 

Service Bids and Contracts 31

Lessons Learned 32

6. SOUTHEASTERN PUBLIC SERVICE AUTHORITY OF VIRGINIA 35

Introduction 35

Background 35

FCA at SPSA 35

FCA in Action: Competing for Waste 37

Lessons Learned 38

7. CITY OF SAN DIEGO, CALIFORNIA 42

Introduction 42

Background 42

FCA In San Diego 43

FCA in Action: Automated Refuse Collection 44

Lessons Learned 45

8. FULL COST ACCOUNTING GLOSSARY 49

%+

$

–
1

T

oday’s municipal solid waste (MSW) management systems are more complex than

ever. With each passing year, the number of

options available for managing MSW continues

to grow. Cities and counties now offer a range of

collection programs, from household hazardous

waste drop-off sites to curbside collection of

garbage, recyclables, yard trimmings, and white

goods. These programs use a variety of facilities, including material recovery facilities, compost sites, waste-to-energy plants, and municipal

landfills. 

With the growing

complexity of today’s

waste management systems, solid waste managers find it increasingly

difficult to track and

evaluate the costs and

benefits of their operations. Tracking costs is

particularly important, however, given the rising costs of waste management services. In fact,

failure to develop adequate cost data can have

serious consequences. Without full cost information, for example, agencies might reject

potentially cost-effective options or overlook

opportunities to expand recycling and waste

reduction programs.

To help municipalities improve the costeffectiveness of their solid waste programs, the

U.S. Environmental Protection Agency (EPA)

promotes the use of full cost accounting (FCA).

FCA provides a common-sense approach to

identifying and controlling the costs of managing a solid waste program. It offers a framework

to aid decision-makers with short- and longterm program planning, and it can help identify

measures for streamlining and improving operations. Knowing the full cost of MSW programs

ensures fiscal accountability and enables agencies to make more informed decisions, respond

better to citizens’ needs, and more efficiently

address environmental concerns. 

EPA developed this set of six case studies to

illustrate the ways that different agencies developed unique FCA systems and applied those

systems to address local issues. The issues

ranged from establishing user fees to cover service costs to developing a financial strategy for

closing an ash landfill.

Although each case study

is unique, all of them

illustrate how FCA

became an integral part of

these agencies’ everyday

budgeting, management,

and decision-making

processes. For each

agency, the use of FCA is

viewed as a good management practice. 

CASE STUDY ORGANIZATION

Each case study provides information on

MSW system operations and costs, describes

local FCA data and its development, and

explains how these data were used to address

one or more local issues. Because this publication focuses on agencies that have been using

FCA for the past 5 to 10 years, it does not

address the early planning stages of incorporating FCA into existing budget and accounting

procedures. Instead, each case study highlights

the overarching uses and benefits of FCA. For

information on planning for and implementing

FCA, refer to the EPA publication Full Cost

Accounting for Municipal Solid Waste: A

Handbook (see inside back cover for a list of

available publications).

1.Introduction

%

+ $

–

Full cost accounting is a systematic

approach for identifying, summing, and

reporting the actual costs of solid waste

management, taking into account past

and future outlays, oversight and support service (overhead) costs, and

operating costs.

■
Each chapter of this report contains the following sections:

■ Introduction. These sections introduce the

agencies and describe how and why each one

started using FCA. They summarize some of

the main points that will be discussed

throughout the case studies.

■ Background. These sections provide an

overview of community demographics, services provided by the agencies, annual budget data, revenue sources, and, when applicable, enterprise fund structures.

■ FCA in [Case Study Site]. These sections

explain how the agencies use FCA, including

specific FCA tools and principles used. They

present influences that have affected each

agency’s use of FCA, information about contractors or special software used, and techniques used to analyze costs.

■ FCA in Action. These sections describe how

the agencies used FCA to address, evaluate,

or analyze recent local solid waste issues.

The examples are used to illustrate the FCA

principles and mechanisms used within the

structure of each particular agency.

■ Lessons Learned. To assist other agencies

that might be evaluating the use of FCA,

these sections present suggestions and

insights that each agency gleaned from its

own experience. They also present other varied uses of FCA that were not described

under FCA in Action. 

METHODOLOGY

EPA began the case study selection process

based on a list of potential agencies compiled

over the past several years. This list consisted of

agencies identified through two nationwide

satellite programs on FCA in 1995 and 1996, an

FCA roundtable in 1996, and an FCA workgroup1 with representatives of recycling, government, and other solid waste organizations and

agencies that has been meeting with EPA over

the past several years. The criteria used to select

case study agencies included:

■ Data Availability. Agencies had disaggregated data on the cost of all solid waste management services, including fully allocated indirect/overhead costs, as well as complete data

on the tonnage of materials managed and

associated revenues. In short, agencies were

able to describe how their data are organized

and how they were developed.

■ FCA Uses. Agencies used FCA successfully

to analyze one or more of the following

issues: implementation or modification of a

fee system, privatization of solid waste services, and modification of an existing solid

waste system in a way that had major, shortterm cost implications.

■ Distribution. Agencies represented a geographically and demographically diverse

group of MSW agencies across the United

States.

COMMUNITY PROFILES

This publication contains detailed case studies for the following communities:

Broward County, Florida — Office of

Integrated Waste Management

Broward County (population 1,070,047 in

1990) began using FCA more than a decade ago

to develop a financial strategy for closing an

existing landfill and to plan a new county 

integrated waste management system. Today,

FCA is embodied in the financial, budgeting,

and accounting system used by the county’s

Office of Integrated Waste Management

(OIWM). OIWM uses the system to assist in

managerial decision-making, facilitate communication with elected officials and municipalities within the county, and ensure that users of

the county solid waste system are charged for

services on a fair and equitable basis. Recently,

Broward County used FCA to bring ash disposal

service charges in line with the useful life of its

ash disposal cells, ensuring that current and

future users of this resource bear its full cost.

2

1 The FCA workgroup consists of representatives from the following agencies and organizations: American Public Works

Association, International City Management Association, Maryland Department of the Environment, National Association

of Counties, National Solid Wastes Management Association, National Recycling Coalition, Solid Waste Association of

North America, the U.S. Conference of Mayors, and the U.S. Environmental Protection Agency (Office of Solid Waste).

■
Columbia, Missouri — Public Works

Department

The Public Works Department in Columbia

(population 69,101 in 1990) began using FCA as

part of a citywide enterprise financing initiative

in the early 1970s. This effort required servicebased city agencies to develop user fees that

would provide sufficient revenue to cover service costs. The department developed a spreadsheet system that uses FCA principles to convert

budget and operating information into full cost

data. When this process was complete, the department was able to clearly identify detailed service costs and associated revenue requirements.

The department’s FCA system also serves as

an important planning and performance analysis tool. Since 1988, the department has added a

variety of residential diversion and processing

services and has invested substantial funds in

its landfill to ensure compliance with the

Subtitle D requirements of the Resource

Conservation and Recovery Act. In expanding

and improving its operations, the department

used its FCA system to plan, evaluate, select,

and integrate the most cost-effective service

options. Recently, Columbia used FCA to develop separate residential, commercial, university,

and roll-off service charges and landfill tipping

fees that cover the majority of its annual operating costs.

Glendale, Arizona — Field Operations

Department

A combination of regional and local issues

motivated Glendale (population 180,038 in

1990) to begin developing an FCA system in the

early 1990s. Increased regional competition

from nearby, privately owned landfills with

lower tip fees resulted in a substantial reduction in waste flow to the Glendale landfill

between 1990 and 1995. Consequently,

Glendale’s landfill tip fee revenues dropped by

50 percent. Faced with the prospect of increasing local service rates, Glendale used an FCA

approach to develop a dynamic cost-based rate

model. The rate model continues to help the

Field Operations Department isolate the important relationship between landfill costs, tip fee

revenues, and the rates for both collection and

disposal services. Glendale’s use of the rate

model has enhanced and improved the cost and

efficiency of its solid waste system so that it

now has the lowest residential solid waste service rate in the region.

Indianapolis, Indiana — Solid Waste

Division

Indianapolis (population 741,592 in 1990)

began using FCA in 1993 as part of a citywide

effort to provide the highest quality public 

services to residents at the lowest cost. The

division began using FCA to facilitate the adoption of market mechanisms—particularly competitive bidding by public employees for solid

waste collection contracts—and to develop performance indicators. Since the division began

competing against private haulers to provide

trash collection services, the city’s solid waste

costs have decreased by more than $5 million.

The division relied on FCA to develop successful competitive bids that have resulted in these

cost reductions. 

Southeast Public Service Authority (SPSA) —

Virginia

The Southeast Public Service Authority

(SPSA), a regional agency (serving a population

of 1,012,789 in 1990) based in Chesapeake,

Virginia, began using FCA in 1988. Initially,

SPSA used FCA to guide the allocation of debt

service costs to its services and facilities. It then

set prices to recover these costs. In the 1990s,

SPSA faced increased competition for waste

from private landfills in the region. Using FCA,

SPSA was able to identify strategic pricing and

investment options which allowed it to keep

waste flowing to its facilities. Recently, SPSA

used FCA to evaluate the options for obtaining

additional landfill capacity.

San Diego, California — Environmental

Services Department

The Environmental Services Department in

San Diego (population 1,110,549 in 1990) has

been using FCA since the 1980s. FCA principles

are reflected in department practices, such as

the use of lease-purchase agreements to match

cost recovery as closely as possible to equip3
4

ment lifetimes. In general, the department uses

FCA as a framework to analyze issues of particular importance. Recently, when considering

whether to implement an automated trash collection system, the department used FCA to

determine whether cost savings could be

achieved by switching to a new system. The

findings provided the impetus the department

needed to make the switch from manual collection.

LESSONS LEARNED

"Know what your costs are so you can control them." This is a guiding principle of FCA,

which was stated succinctly by Lowell

Patterson, Director of Public Works in

Columbia, Missouri. While the communities

featured in the case studies consider FCA to be

an integral part of doing business, the solid

waste directors were able to isolate some of the

key lessons that might assist other communities

that are evaluating the use of FCA. Lessons

learned and general observations include:

■ Structure budget and accounting systems so

they are consistent with the internal and

external services provided by the agency.

■ Develop standard forms and procedures that

make FCA automatic.

■ Invest necessary resources up front to develop FCA systems and allow sufficient time for

implementation.

■ Maintain and update FCA systems on a regular basis. 

■ Use FCA for management purposes rather

than just accounting.

■ Ensure that senior management is committed

to FCA.

■ Consider involving consultants with the

development and implementation of FCA

tools.

■ If needed, solicit technical support for staff

training, data development, and development

of an appropriate FCA system.

■ Recognize that using FCA often leads to

innovations and the adoption of other best

management practices and tools.

■ If long-term debt is an issue, try to match

financing terms with facility or equipment

life so that debt service expenses are in line

with the depreciated cost (or “economic

value”) of the resource in question.
INTRODUCTION

In the early 1980s, Broward County relied on

FCA to develop a state-of-the-art integrated

waste management system within the Broward

Solid Waste Disposal District (BSWDD). The

BSWDD is comprised of 24 of the 29 municipalities in Broward County as well as all of the

county’s unincorporated areas. The Office of

Integrated Waste Management (OIWM) was created in 1991 to manage the integrated solid

waste management system on behalf of its member jurisdictions. 

OIWM’s use of FCA today is strongly influenced by its role as a contract administrator.

Virtually all of the OIWM’s costs must be covered through fees or levies paid by member

jurisdictions that use the solid waste services.

Inter-local agreements restrict OIWM from

increasing annual fees for members by more

than 70 percent of the consumer price index in

any given year. Thus, OIWM relies on FCA to

ensure that costs do not fluctuate dramatically

from year to year based on capital requirements

and associated financing arrangements.

BACKGROUND

Located in the southern part of the state,

Broward County is one of the largest and most

densely populated counties in Florida. In addition to its permanent population, nearly 90,000

part-time residents reside in Broward County

during its peak season, and more than 3,000,000

tourists visit the county each year. 

OIWM does not own most of the processing

and disposal capacity in the BSWDD, but rather

serves as a contract administrator. OIWM provides collection services, through franchised

haulers, to its unincorporated residents only

(who comprise about 44,000 single and 26,000

multifamily households in the unincorporated

areas of BSWDD). Its major focus is on the

county’s resource recovery system (a combination of recycling, incineration and ash disposal,

and landfilling), which all municipalities and

unincorporated areas in the BSWDD use. In

addition, it provides recycling, technical assistance and contract services to government, institutional, and commercial establishments in the

county. OIWM does own and operate a small

landfill, which is used for non-combustible and

bulky materials that cannot be incinerated. 

OIWM employs a staff of 80 to operate or

administer its system. Thirty-four are involved

directly with the landfill, while the remainder

devote their time to contract and general administration as well as outreach and technical assistance. See Table 1 on page 11 for additional

details on services provided by OIWM.

Figure 1 on page 6 provides a breakdown of

the revenue sources for OIWM's operations.

OIWM's waste management activities are

financed through the following three interlinked enterprise funds:

■ The Resource Recovery System Fund covers

costs associated with the facility-side of the

resource recovery system. This is the largest

of OIWM's three funds, representing 84 percent, or roughly $83.5 million, of OIWM's

annual revenue of $100 million. Facility tip

fees (a direct user fee) make up 92 percent of

the revenue generated by this fund.

■ The Unincorporated Area Waste Collection

Fund covers costs and revenues associated

5

2.Broward County, Florida

Office of Integrated Waste Management

Demographic Characteristics, 

Broward County, Florida, 

Solid Waste Disposal District

Population (1990) 1,070,047

Area (square miles) 337

Density (persons per square mile) 3,175

Households 445,590

Household Income (1989 $) $30,731

Housing in 1- to 4-unit structures 55%

%

+ $

–
with providing collection services to unincorporated areas of the county. A special

assessment on those residential units receiving collection services comprises 88 percent

of this fund's revenues.

■ The Solid Waste Fund covers costs associated with recycling activities and closed facilities. Recycling and tire disposal grants from

the state make up 71 percent of this fund's

revenues.

6

SOLID WASTE (SW) FUND

$3,054,582

UNINCORPORATED AREA WASTE COLLECTION

(UAWC) FUND $13,472,168

RESOURCE RECOVERY SYSTEM (RRS) 

FUND $83,505,329

INTEREST

EARNINGS 

9%

SCHOOL CONTRACT

MGMT. 9%

TRANSFER FROM 

UAWC FUND 

5% 

OTHER SW FUND 

REV. 6%

RECYCLING/TIRE 

DISPOSAL GRANTS 

71%

COMMERCIAL 

FEES 

5%

RESIDENTIAL 

FEES 

4%

RECYCLING

SALES 

2 % OTHER 

UAWC 

FUND REV. 

1%

SPECIAL 

ASSESSMENTS 

88%

RRS

84%

RECYCLING 

SALES 

3%

TRASH 

FEES 

2%

RECYCLING 

GRANT 

2%

OTHER RRS 

FUND REV. 

1%

FACILITY

TIP FEES

92%

FIGURE 1: OIWM SOURCES OF REVENUE 

(TOTAL REVENUE = $100,031,979)

SW 3%

UAWC

13%
FCA IN BROWARD COUNTY 

OIWM's role as a contract administrator

strongly influences its use of FCA. The agency's

member constituents (i.e., municipalities and

unincorporated areas) incur varying costs for

solid waste services. OIWM carefully tracks

these costs so it can collect fees that are sufficient to cover its contractual obligations and

operational expenses. Moreover, OIWM is

restricted by inter-local agreements from

increasing annual rates for its members by more

than approximately 70 percent of the consumer

price index in any given year. OIWM, therefore,

must have an accurate understanding of both

short- and long-term costs.

OIWM uses a commercially available software application to organize its accounting,

budgeting, and financing information. Information in the software is organized based on 

OIWM's enterprise fund structure and the 18

activity-based cost centers shown in the accompanying text box. Thus, the Unincorporated

Area Waste Collection Fund, which covers costs

associated with providing collection services to

unincorporated areas of the county, includes

"mandatory collection," "mandatory recycling,"

and "trash transfer" cost centers. Each cost center is comprised of detailed cost components

such as personnel, contracts, administrative

expenses, and other operating costs. 

OIWM is primarily an administrative agency;

therefore, its treatment of administrative and

overhead costs is particularly noteworthy.

OIWM accounts for both "external" and "internal" overhead costs. External overhead costs

include fees that OIWM pays to other county

departments for services such as printing, budgeting, and legal expenses. Table 2 on page 12

indicates that OIWM paid a total of $521,651 in

external overhead fees to other county departments during fiscal year (FY) 1996. The table

also provides details on the allocation procedures the county uses to charge OIWM for

these services. OIWM, in turn, assigns these

fees to each of its three enterprise funds based

on the respective fund's direct usage of external

overhead services. Thus, for example, the

Resource Recovery Fund incurred $287,160 in

external overhead costs for services provided by

other county departments.

Internal overhead expenses include OIWM

supervisory and administrative personnel as

well as OIWM's administrative operating and

capital expenditures. OIWM allocates costs

incurred for these expenses across the three

enterprise fund cost centers using a variety of

techniques. For example: 

■ The OIWM allocates administrative staff

salaries and associated fringe benefits based

on staff time spent or billed to specific cost

centers. 

■ OIWM allocates other operating expenses

(such as supplies, printing, utilities, dues,

and memberships) and small capital expenses based on either the percentage of the

overall budget (excluding administration) the

fund cost center comprises or the percentage

of office space footage the cost center utilizes.

7

OIWM Enterprise Funds and

Related Activity-Based Cost

Centers 

1. Unincorporated Area Waste Collection Fund

Cost Centers

■ Mandatory Collection

■ Mandatory Recycling

■ Trash Transfer Stations

2. Solid Waste Fund Cost Centers

■ Recycling Technical Assistance

■ Pompano Incinerator (closed)

■ Davie Landfill (closed)

■ Waste Tire Grant

3. Resource Recovery System Fund Cost Centers

■ Solid Waste Operations

■ Solid Waste Landfill Closure

■ Household Hazardous Waste

■ Administration

■ Resource Recovery Board

■ North Resource Recovery Plant

■ South Resource Recovery Plant

■ South Ash Landfill

■ Materials Recovery Facility

■ Debt Service

■ Debt Service Reserve
8

As an illustrative example, Table 3 on page 13

provides details on the specific types of administrative costs tracked for the Resource Recovery

Fund (note that this includes the $287,160 in

external overhead described in the preceding

paragraph). OIWM tracks similar types of administrative costs for the other two funds as well

(they are not shown in the text box because they

are not as large as the administrative cost center

for the Resource Recovery Fund).

OIWM has also developed FCA techniques to

account for past and future outlays associated

with long term assets, such as its disposal capacity. For example, in considering landfill costs it

accounts for land depletion costs, closure costs,

and land improvement costs. The text box above

illustrates a formula that OIWM uses to account

for land improvement costs in its annual landfill

costs. Similar formulas are used to estimate current costs of future outlays, such as closure and

postclosure care. 

FCA IN ACTION: BALANCING COSTS AND

FINANCING OF LONG-TERM INVESTMENTS

Converting cash outlays for long-term

resources into costs is one of the principles of

FCA. While cash outlays for long-term assets are

often based on the type and term of financing

arrangements, costs are accrued over an asset's

useful life. Thus, cash outlays for and costs of

long-term resources can differ. If, for example,

the term of a loan (or other financing mechanism) differs from the operating life of a given

resource, then cash outlays for loan payments

will not reflect the accrued cost of the resource.

When resource costs and financing are out of

sync, problems can arise. The following discussion illustrates this point for an important and

unique element of OIWM's integrated solid

waste system. Although the focus of the discussion is on OIWM's ash disposal capacity, the

same general principles apply for many longterm resources such as vehicles, transfer 

stations, or recycling facilities.

In 1989, OIWM entered into a 20-year service

agreement with a private contractor to provide

incineration and ash disposal capacity for the

county. As part of this agreement, OIWM's contractor agreed to finance development and construction of ash disposal cells, and OIWM agreed

to reimburse the contractor for these financing

costs over the 20-year term of the service agreement. The agreement allowed OIWM to essentially spread the term of financing for the ash

disposal cells over a 20-year period. 

OIWM anticipated needing two cells over the

20-year life of the agreement. The first cell was

constructed in 1991 and had a projected life of 8

to 10 years. After the first cell reached its capacity, a new cell would be built for ash disposed of

over the remaining life of the contract.

As mentioned in the previous section, OIWM

must collect fees from its member agencies that

are sufficient to cover its contractual obligations

and operational expenses and cannot raise fees

in any given year by more than 70 percent of the

consumer price index. In the first 5 years of the

operation, OIWM charged an ash disposal fee (a

component of the tip fee revenue shown in

Figure 1) based on cash outlays associated with

the 20-year financing agreement for cell one,

even though the cell would only last for 8 to 10

Accounting for Past Outlays at

the Broward County Landfill

1. $5,125,000 Land Improvement

2. $4,000,000 Site Development --------------------

3. $9,125,000 Total Costs 

[ Line 1 + Line 2 ]

4. $4,282,759 Total Amortization as of

9/30/96 --------------------

5. $4,842,240 Unamortized Costs 

[ Line 3 - Line 4 ]

6. 3,300,000 Estimated Capacity (tons)

7. 898,645 Tons Delivered

Through 9/30/96 --------------------

8. 2,401,355 Remaining Capacity

(tons) [ Line 6 - Line 7 ] --------------------

9. $2.02 Cost Per Ton 

[ Line 5 ÷ Line 8 ]
9

years. Thus, during the first 5 years, annual tip

fee revenues were significantly lower than the

cost of ash disposal over the life of the 20-year

service agreement (see schematic below), creating the following problems: 

1. If tip fees remained at or near 1990 through

1995 levels, revenues would be insufficient

in future years to cover costs associated with

construction and closure of the second cell

because OIWM could not raise fees by more

than 70 percent of the consumer price index

in any given year.

2. Between 1990 and 1995, users of the first cell

were not paying a tip fee that was based on

the 20-year financing, yet the first cell would

be depleted in 8 to 10 years. This meant that

costs associated with the first cell were effectively being deferred and would need to be

covered in the tip fee charged to users of the

second cell. 

To address these issues, OIWM devised a

way of spreading financing for both cells over

their useful life so financing, revenues, and cost

would balance and users of the landfill would

be responsible for bearing its full cost. 

OIWM estimated that $10 million would be

required over the remaining 3 to 5 years of the

first cell's life to cover all outstanding costs

associated with its development, construction,

operation, and closure. Based on this estimate,

OIWM recommended that the county establish a

dedicated reserve fund that would set aside $2

million annually from incineration tip fees (no

increase in tip fees was needed because $0.90

per ton was already included in the tip fee for

general reserves). Although OIWM cannot use

the dedicated fund directly to pay off costs for

the first cell, it can use the fund to offset costs

associated with construction of the second cell.

Thus, forecasted cost increases resulting from

undercharging users of the first cell based on

financing terms instead of accrued costs could

be offset by cell two construction savings. As

OIWM reasoned with the county commission,

using the fund in this way would allow OIWM

to effectively "charge" users of the first cell on

an accrual basis for the full cost of the asset 

provided to them. The county commission

approved OIWM's proposal. 

LESSONS LEARNED

As a large regional agency, the Broward

OIWM has used FCA to help in its decisionmaking processes. A major aspect of OIWM's

current use of FCA involves executing, administering, and monitoring solid waste service contracts. In addition, OIWM believes FCA

Conceptual Overview of Revenue, Cost, and Funding Imbalances for Ash

Disposal Capacity

■ ■

1990 2000 2010

Cell 1 Operating Life 1991-1999 Cell 2 Operating Life 2000-2010

Dollars ($)

Revenue

Cost of Ash Disposal Over 20 Years

Cell 1 Cash Outlays

Year

■
improved its credibility among its 24 member

communities and the unincorporated areas of

the county. OIWM indicates, for example, that

without FCA, it would not have been possible

for the agency to cap annual rate increases for

its members at 70 percent of the consumer price

index. FCA provided OIWM with a complete

picture of the system costs that were needed to

enter into such an arrangement.

Based on its experience with FCA, OIWM

offers the following advice: 

■ Structure budgets and accounting systems so

they are consistent with the internal and

external services provided by the agency.

OIWM uses 18 activity-based cost centers that

are consistent with the services it provides to

organize its budget, revenue, and cost information. 

■ Develop standard forms and procedures that

make FCA automatic. For internal budgeting

and accounting functions, OIWM uses offthe-shelf software that has been customized

to reflect full allocation of costs to its activity-based cost centers. The software helps

accounting and managerial staff members

track and allocate costs. 

■ Invest necessary resources up front to develop the FCA system. OIWM spent 600 to 700

hours setting up its automated FCA accounting system and training staff in its use. With

the system now in place, accounting and

budgeting functions have been streamlined

and the system only requires about 8 hours

of staff time per month for maintenance and

data entry.

CONTACT: 

Tom Henderson, Director

Broward County Office of Integrated 

Waste Management 

201 South Andrews Avenue 

Ft. Lauderdale, FL 33301 

Phone: 954 765-4208

E-mail: thenderson@co.broward.fl.us

10

Other Uses of FCA in Broward

County, Florida, 1984 through

1998 

■ Developing a financial strategy for closing an

existing landfill.

■ Planning and implementing a new integrated

system that included recycling and waste-toenergy components.

■ Balancing costs, revenue, and financing for

long-term assets in order to develop fair and

equitable rates for the use of long-term

resources such as disposal capacity.

■ Responding to state reporting requirements

that require public solid waste service

providers to calculate and disclose the full cost

of solid waste services.
11

TABLE 1: BROWARD COUNTY OIWM SUMMARY OF SERVICES AND FACILITIES

Solid Waste

Services and

Facilities

Source

Reduction/Recycling

Outreach

Curbside Recycling

Household Hazardous

Waste (HHW)

Bulky Item Collection

Residential Trash

Collection

Institutional/Public

Recycling

Commercial Trash

Collection

Other Solid Waste

Management Services

Recycling Facilities

Waste-to-Energy 

Facilities

Bulky Waste Drop-Off

Facilities

Landfills

Service

Provider

A=Agency

C=Contract

A

C

A and C

C

C

C

C

A

C

C

C

A and C

Tonnage

Managed

N/A

9,200

207

4,450

60,870

3,700

38,000

N/A

73,000

1,010,000

2,400

87,450

Comments

Provides outreach to the residential sector on source reduction and backyard composting, a buy-recycled campaign,

and a mobile recycling fair. Provides technical assistance to

businesses and unincorporated area apartment complexes.

Contracts for weekly collection from unincorporated 1 to 9

family structures and apartment complexes.

Operates one county-owned HHW collection site and

three special waste depots. Packaging and disposal is 

contracted to a private company; OIWM provides outreach and administration.

Contracts for monthly bulky item collection from unincorporated 1 to 9 family structures.

Contracts for twice weekly collection from unincorporated

1 to 9 family structures.

Contracts for school recycling pickup, participates in government office recycling, and has incentive program to

clean up public tire piles.

Manages permits of three franchised haulers in the unincorporated areas of the county. Businesses can choose

among them as they please.

Runs an adopt-a-street program, a community cleanup

program, and a lot clearing program in the unincorporated areas.

Contracts with a private company for the construction and

operation of a materials recovery facility (MRF). Revenue is

returned to participating cities. The MRF handles all residential material and a small amount of commercial material.

Contracts with a private company to design, construct,

own, and operate two waste-to-energy facilities. These

facilities are capable of processing 4,500 tons of waste

per day. The county has a contractual requirement to provide 1,095,000 tons to the facilities each year.

Contracts operation of three drop-off sites that are used in

conjunction with unincorporated bulky waste service.

Owns and operates a landfill that handles noncombustible

and bulky materials; also has as-needed contract with a private company. The landfill has an estimated life of 50 years,

or about 24 million cubic yards of remaining capacity.
12

TABLE 2: OIWM OVERHEAD FEES PAID TO OTHER CITY DEPARTMENTS FOR

SERVICES (FY 1996)

Service 

Motor Pool

Risk Management

Print Shop

County Attorney

Budget

Management

Management

Services

Information

Technology

Human Resources

Purchasing

Accounting

Other

Total

OIWM Cost

$66,598

$5,188

$5,334

$2,615

$35,953

$10,234

$51,367

$33,188

$56,917

$67,654

$186,603

$521,651

Allocation Method Used

Motor pool charges for services

Risk management charges for services

Print shop charges for services

Legal service fees per user department

Budget transactions processed

Number of employees per department and number of revenue

and expenditure transactions per department

Pieces of mail processed per department, number of stops per

department, radio units per department, and number of staff

hours per department served

Various allocation methods based on types of employees

Number of purchase order line items per department, number

of formal bids per department, and number of employees per

department

Number of revenue and expenditure transactions per department, number of outstanding debt issues per department, and

number of payment vouchers processed per department

Costs are calculated for a wide variety of other specific indirect

expenses incurred by OIWM for services provided by other

county departments such as finance and administration services, revenue collection, commission auditor, citizens service

center, intergovernmental affairs, public information, employment/small business development, charter review commission,

county commission, and county administrator. Various allocation techniques (e.g., direct charge, number of employees,

number of transactions, etc.) are used to calculate OIWM's

costs for these services depending on the service provided
13

TABLE 3: BROWARD COUNTY OIWM ADMINISTRATIVE COST COMPONENTS

FOR RESOURCE RECOVERY FUND (FY 1996)

Cost Component Cost

Personnel

Executive Salaries $244,054

Regular Salaries $598,992

Overtime $1,474

FICA $66,274

Retirement $148,089

Group Insurance $73,540

Workers Compensation $2,090

Unemployment Compensation $0

Operating Expenses

Auditing Fees $20,000

Contractual Services $9,065

Contractual Services — Temporary Personnel $2,092

Travel Per Diem $5,135

Business Travel $5,680

Motor Pool Expenses $3,795

Auto Allowance $345

Telephone $16,919

Postage $8,923

Utilities — Electricity $15,615

Rent — Other $13,460

Rent — Office and Building $172,879

Rental Equipment $0

Self — Insurance $7,240

Equipment Maintenance $6,395

External Printing $2,474

Internal Printing $1,531

Cost Allocations (from County Central Services) $287,160

Office Supplies $7,286

Office Equipment $1,498

Safety Supplies $416

Dues and Memberships $5,435

Subscriptions $1,574

Miscellaneous Expenses $3,362

Capital Expenditures

Machinery and Equipment-New $3,337

Computer Hardware $44,645

Computer Software $3,659

TOTAL $1,784,433
INTRODUCTION

The Columbia, Missouri, Public Works

Department began using FCA in the early 1970s

as part of a citywide enterprise financing initiative that required service-based city agencies,

like the Public Works Department, to develop

user fees that would provide sufficient revenue

to cover service costs. The first step in developing such fees was accounting for service cost.

To do this, the department developed a spreadsheet system that uses FCA principles to convert budget and operating information into full

cost data. When this process was complete, the

department was able to clearly identify detailed

service costs and associated revenue requirements. 

Although developing cost-based service fees

provided the original impetus for using FCA in

Columbia, the department's FCA system also

has served as an important planning and performance analysis tool. Since 1988, the department

has added new residential recycling and composting services and has invested substantial

funds into its landfill to ensure compliance

with the Subtitle D requirements of the

Resource Conservation and Recovery Act. The

department has relied upon FCA to evaluate

and implement cost-effective new operations.

FCA helped the department control costs of

existing operations by providing a framework in

which specific cost centers can be evaluated on

a regular basis. Therefore, despite increased

service levels, the department's use of FCA has

helped it to maintain competitive service rates. 

BACKGROUND

Located in Boone County, in central

Missouri, Columbia is a small but rapidly growing city of about 70,000 people. Two private colleges and the University of Missouri-Columbia

provide a student population that constitutes

more than a quarter of the city's population. As

a "college" town, a substantial percentage of

Columbia's population is highly educated and

transient in nature.

Columbia's Public Works Department provides

a full range of solid waste management services

(see Table 4 on page 20 for a description of the

solid waste services offered by the department).

It collects recyclables, yard trimmings, bulky

waste, and garbage from the entire residential

community. In addition, it competes with private haulers to collect refuse from the commercial sector, which generates more than 69 percent

of the solid waste collected by the department.

The department owns and operates a landfill that

is used by private and public haulers from

throughout the region. Approximately 44 percent

of the waste disposed of at the landfill is from

sources outside Columbia. At the landfill, dropoff sites for recyclables, yard trimmings, and

household hazardous waste (HHW) are available

to all commercial and residential customers. To

oversee these services, the department has an

operating and administrative staff of approximately 61 full-time employees and 25 temporary

employees. 

For FY 1998, the department's total operating

and capital budget was approximately $7.7 million. Since the department is financed through

an enterprise fund, direct user fees and tip fees

support its budget expenditures. Figure 2 on

page 15 provides a breakdown of the department's revenue sources. 

14

3. City of Columbia, Missouri

Public Works Department

Demographic Characteristics,

City of Columbia, Missouri

Population (1990) 69,101

Area (square miles) 44

Density (persons per square mile) 1,570

Households 25,842

Household Income (1989 $) $22,059

Housing in 1- to 4-unit structures 66%

%

+ $

–
15

FCA IN COLUMBIA

The Public Works Department's annual budget expenditures provide a starting point for

FCA in Columbia. These expenditures are

tracked in the city's central financial system,

which organizes expenditures into "cost centers" that track detailed costs (such as labor,

materials, and insurance). The department has

20 operational cost centers in the central financial system, several of which have been added

in the past 10 years (see text box on page 16).

Although these cost centers provide much of

the raw data needed for FCA, the department

modifies this information in two ways: 

1. Allocating expenditures into 10 service categories and/or customer groups defined by the

department. These categories include administration, district planning, recycling, composting, residential, commercial, roll-off,

University of Missouri, landfill, and larvaciding (mosquito control). 

2. Converting cash outlays for a given service

category into costs. To convert these expenditures, the department uses FCA techniques

such as depreciation, amortization, and full

allocation of administrative and overhead

costs to specific service categories. 

The Public Works Department has created a

spreadsheet to assist in modifying financial

(e.g., cash and budget) data to full cost data.

The spreadsheet template and associated data

are shown in Table 5 on page 21. In general, calculating full costs for the 10 service categories

involves the following steps: 

■ Directly assigning the 20 cost centers tracked

in the central financial system to one or more

of the department's 10 service categories (see

column 1 of Table 5—bold faced items are

department service categories, cost centers

appear indented under each boldfaced service category). The department assigns cost

centers to service categories based on department service definitions and customer classifications. The recycling category in Table 5,

for example, includes curbside and drop-off

FIGURE 2: COLUMBIA PUBLIC WORKS DEPARTMENT SOURCES OF REVENUE 

(REVENUE REQUIREMENT = $7.7 MILLION)

INVESTMENTS REVENUE 3%

UNIVERSITY SERVICE FEES 4%

COMMERCIAL USER FEE 18% 

ROLL-OFF SERVICE

CHARGES

12%

OTHER 2%

RESIDENTIAL USER FEES 40%

LANDFILL TIP FEES 21%
recycling as well as white goods, HHW, volunteer education, and yard trimmings collection services. In many cases, a cost center

that is tracked individually in the city's central financial system is assigned to more than

one of the department's 10 service categories.

For example, the administration, container

repair, and depreciation cost centers are

assigned not only to the recycling service category but also to the residential, commercial,

roll-off, university, and landfill service categories. A description of how the department

allocates these shared costs among its service

categories is provided below. 

■ Entering total annual operating budgets for

each of the cost centers (see column 2 of

Table 5). Total annual operating budgets for a

given cost center, for example, are based on

several detailed costs including personnel,

fringe, materials, supplies, and utilities. 

■ Assigning depreciation costs to service categories based on actual capital and equipment

usage by service category (see column 3 of

Table 5). Using depreciation information

results in comparable cost estimates that are

based on the economic value of resources

over their useful life instead of annual cash

outlays on resources, which can fluctuate

dramatically from year to year. 

■ Assigning landfill closure and postclosure

costs, which are tracked as a separate cost

center in the central financial system, to the

landfill services category (see column 5 of

Table 5).

■ Allocating administration costs to service

categories based on the service center's percentage of budget size (see column 6 of Table

5). Administration costs include overhead,

indirect costs, and intergovernmental charges

for services provided by other city agencies.

The recycling operating budget ($841,621),

for example, represents about 14 percent of

the department's operating budget, minus

administration ($5,953,315). The recycling

service's share of administration costs, therefore, is 14 percent ($145,780) of the total

administrative budget ($1,025,911).

■ Allocating container repair and roll-off services used by several of the department's 10

service categories based on budget size (see

columns 7 and 8 of Table 5).

After allocating these costs, the department

calculates the full cost of services as shown in

the text box on page 18 (see column 9 of Table 5

for more details). While the department's annual operating budget totals approximately $7 million, the full cost of department services

increases to $9 million when costs associated

with depreciation, debt retirement, and closure

and postclosure are included (see columns 3

through 7 of Table 5). The budget differs from

the full costs of individual services as well.

These differences illustrate clearly the information FCA can provide for solid waste program

managers.

16

Public Works Cost Centers

Tracked in City's Central

Financial System

Administration

Solid Waste District*

Commercial Collection

Container Repair

Downtown Containers

Roll-Off Service

Residential Service

Landfill Operations

Composting*

Larvaciding

University Collection

Curbside Recycling*

Drop-Off Recycling*

Volunteer Program*

White Goods Collection

HHW* 

Yard Trimmings Collection*

Debt Retirement

Closure and Postclosure*

Depreciation

* Indicates new cost center added within the past

10 years.
17

FCA IN ACTION: DEVELOPING COST-BASED

PRICES FOR SERVICES AND CUSTOMER GROUPS 

Development of Columbia's landfill tip fee and

residential service charges—the two largest

sources of revenue for the city—illustrates how

the Public Works Department uses FCA to develop

cost-based rates for specific solid waste services. 

Calculating Landfill Tip Fees

City of Columbia trucks, public haulers from

nearby communities, private haulers, and residential and commercial establishments bring

waste to Columbia's landfill. All landfill customers have access to the composting, recycling,

and HHW drop-off facilities located there. As a

result, landfill tip fees also must incorporate

costs for these services. 

To calculate the landfill tip fee, the department allocates certain compost and recycling

service costs to the landfill cost category as

shown in column 3 of Table 6 on page 22. The

department, for example, allocates the $180,506

compost service cost, which includes administration and depreciation costs as well as the

annual operating budget to the landfill service

category. Similarly, it allocates drop-off recycling

and HHW costs to the landfill service category

as shown in column 3 of Table 6. Note, however,

that the re-allocated drop-off and HHW costs are

each $39,348 higher than the full costs for these

services shown in column 9 of Table 5. The

extra $39,348 reflects the department's assumptions about administration, container repair, and

depreciation costs incurred by these programs,

which must be transferred along with the other

program costs to the landfill cost center. The

remaining recycling category cost ($751,600)

represents the department's cost of providing

recycling services—including curbside recycling,

volunteer outreach, curbside white goods collection, and curbside yard trimming collection—

exclusively to residents in the city of Columbia. 

In total, the Public Works Department reallocates $180,506 and $335,363 from the compost and recycling service categories, respectively, to the landfill service category, increasing

overall landfill service costs by $515,869. The

revised full cost of the landfill ($3,823,006)

reflects the cost of the landfill and all of its associated drop-off services. To derive the tip fees,

the department allocates this full cost across five

specific customer classes (i.e., residential, commercial, roll-off, University of Missouri, and

waste disposed of by other public and private

haulers) based on the relative tonnage of waste

landfilled by each class (see column 5 in Table

6). Forty-four percent (56,597 tons) of waste disposed of at the landfill, for example, is from

public or private haulers. Forty-four percent of

the total landfill cost is $1,694,606 (column 6 in

Table 6). Dividing this amount by 56,597 tons

disposed of by haulers other than the city yields

a tip fee of $29.94, as shown in column 8. 

Columbia FCA Information

Service Category Operating Budget Full Cost*

Administration $1,025,911 $0

Recycling $841,621 $1,086,963

Composting $153,856 $180,506

Residential Service $1,536,451 $1,965,192

Commercial Service $1,261,463 $1,544,165

Roll-Off Service $405,013 $482,350

Missouri University $197,059 $301,044

Landfill Service $1,477,505 $ 3,307,137

District Planner $56,936 $56,936

Larvaciding $23,411 $27,466

TOTAL $6,979,226 $8,951,759

*Includes allocated operating and non-operating costs.
18

Calculating Residential Service Fees 

In addition to landfill tip fees, the Public

Works Department charges a monthly fee to city

residents to cover costs associated with the collection of trash, bulky items, recyclables, and

yard trimmings. To develop the residential fee,

the department first calculates the costs associated with all collection, processing, and disposal services provided to residential customers.

As shown in Table 6, these costs include:

■ $751,600 for recycling service, which is the

full cost of all curbside collection programs,

net of drop-off recycling and HHW costs

(these are included in the landfill tip fee calculation described above).

■ $1,965,192 for garbage collection, including

administration, container repair, depreciation, and annual operating expenses (e.g.,

labor, materials, capital, and insurance).

■ $654,793 in landfill tip fees, which is the

$29.94 tip fee (described above) multiplied

by the tonnage of waste disposed of by

Columbia residents (21,869 tons). 

After calculating costs for these services (see

column 7 of Table 6), the department divides the

resulting adjusted recycling and residential service costs ($751,600 and $2,619,986, respectively)

by the number of residential households served

(approximately 33,000). The department then

divides this figure by 12 months to arrive at the

unit costs of $1.99 and $6.93, respectively (shown

in column 9 of Table 6). The sum of these values,

$8.92 per household per month, is the department's monthly fee for residential service.

LESSONS LEARNED

The FCA system that the department uses to

calculate service costs and associated rates also

helps it improve performance and control costs.

The department uses the information provided

in Tables 5 and 6, for example, to evaluate the

incremental costs of services on a year-to-year

basis. Thus, if the cost of residential services

increases, the department can identify the

source and, if appropriate, implement cost control measures. In this way, the department's use

of FCA has helped it to maintain competitive

rates while increasing the level of services it

provides to its customers. Other general ways

the department has used FCA in the last 10

years are summarized in the text box below.

Based on its experience with FCA, the Public

Works Department offers the following advice: 

■ Use FCA for management purposes rather

than just accounting. Although the department uses FCA to obtain a more accurate

understanding of solid waste service costs,

accounting is not the department's primary

motivation for using FCA. The department

uses FCA to improve pricing, planning, performance, and decision-making.

■ Allow FCA to grow out of the unique operations and services provided by a given department or agency. Clearly defined services provide a structure for organizing costs and performance data. Without clear service definitions, it is difficult or impossible to assemble

and interpret useful cost information.

Other Uses of FCA in

Columbia, Missouri, 

1987 through 1997

■ Developing residential, commercial, university,

and roll-off service charges, and landfill tip

fees that together cover the full cost of operating the solid waste system. 

■ Identifying, implementing, and administering

cost-effective new programs and services,

including drop-off and curbside yard trimming

composting, white goods collection, and HHW

collection programs. 

■ Identifying incremental costs of specific services

and controlling costs by providing an analytical

framework in which the cost of a given service

can be compared against a previous year's

cost of service.

■ Tracking costs associated with implementation

of RCRA Subtitle D requirements (see column 5

in Table 5 on page 21).
■ Maintain and update FCA systems on a regular basis. The department has developed

detailed record-keeping procedures at all levels of its operations to enhance its ability to

track and evaluate the cost of services on a

regular basis. The department's timesheet

and other record-keeping systems, for example, have been restructured to reflect the

eight specific service categories defined by

the department. 

■ Allow sufficient time for FCA systems to be

implemented. Developing the analytical

structure and associated record-keeping and

data collection procedures requires the most

time, effort, and staff training. 

CONTACT:

Lowell Patterson, P.E., Director

Public Works Department

P.O. Box N 

Columbia, MO 65205

Phone: 573 874-7250

E-mail: lpatters@mail.coin.missouri.edu

19
20

TABLE 4: COLUMBIA SUMMARY OF SERVICES AND FACILITIES (FY 1997)

Solid Waste

Services and

Facilities

Source Reduction/

Recycling Outreach

Drop-Off Recycling

Curbside Recycling

Collection

Curbside Yard

Trimmings Collection

HHW

Bulky Item Collection

Residential Trash

Collection

Commercial Trash

Collection

Roll-Off Trash

Collection

University of Missouri

Trash Collection

Compost Facilities

Mulching Sites

Landfills

Miscellaneous

Services

Service

Provider

A=Agency

C=Contract

A

A and C

A and C

A

A

A

A

A

A

A

A

A

A

A

Tonnage

Managed

N/A

1,513

686

2,645

62

N/A

21,869

25,523

18,261

5,432

6,000

N/A

127,682

N/A

Comments

Full-time waste minimization coordinator and a volunteer network to help with recycling and source reduction projects.

Collects from six drop-off areas daily. Transports materials to a

private processor. Both residents and nonresidents use drop-off

sites. 

Offers curbside collection to single- through four-family houses

every other week as part of the monthly residential trash collection fee. Materials are processed at a private MRF.

Offers weekly yard trimmings collection to single- through fourfamily households. Ten bags per year are included as part of the

residential monthly trash collection fee, while additional bags

are collected for $0.50 per bag.

Collects used oil from single- through four-family households

along with other recyclables; all residents may bring HHW to a

city-run facility. Approximately 1,525 vehicles dropped materials

off at the facility in 1996.

Collects on a call-in basis. Residents must pay $5 per white

good collected, while other bulky items are collected free of

charge. Roughly 95 tons of white goods are collected annually.

Offers weekly pickup to single- through four-family households.

Residents must use bags, but 75 bags per year are included in

the residential monthly trash collection fee. Apartment complexes also receive city collection.

Provides mandatory collection from all establishments that generate food. Others can use private haulers, but city collection is

cost-competitive.

Provides roll-off collection containers and services by request. 

Provides collection services to the university, which is a large

enough account that it warrants its own budget category.

Operates a compost site at the landfill. Site is used by residential and nonresidential haulers. 

Operates two drop-off mulching facilities. Both residents and

nonresidents use the drop-off facilities.

Collects 56 percent of incoming waste; the rest is brought in by

private haulers and imported from outside the city. The landfill

area available is estimated at 80 years, given its current usage.

Funds one full-time solid waste district planner through a state

grant. This category also covers costs for a larvaciding program

(e.g., mosquito and fly control) from early spring until late fall.
21

TABLE 5: FULL COST ACCOUNTING IN COLUMBIA (FY 1998)

1 Debt retirement is financial data that are generally not considered relevant to FCA. 

1

SERVICE 

Cost Center

ADMINISTRATION

Depreciation

SW DISTRICT 

PLANNER

RECYCLING

Administration

Container Repair

Curbside

Drop-Off

Volunteer Program

White Goods

HHW

Yard Trimmings

Depreciation

COMPOSTING

Administration

Composting

Depreciation

RESIDENTIAL

Administration

Container Repair

Residential

Depreciation

COMMERCIAL

Administration

Commercial

Container Repair

Downtown Containers

Depreciation

ROLL-OFF

Administration

Container Repair

Roll-Off

Depreciation

MISSOURI 

UNIVERSITY

Administration

Container Repair

Roll-Off

Missouri University

Depreciation

LANDFILL

Administration

Container Repair

Landfill

Depreciation

Interest Expense

Debt Retirement

1

Closure & Postclosure

LARVACIDING

TOTALS

2

Operating

Budget

$1,025,911

$56,936 

$841,621

$383,510

$150,202

$70,231

$19,281

$75,017

$143,380

$153,856

$153,856

$1,536,451

$1,536,451

$1,261,463

$1,064,505

$190,818

$6,140

$405,013

$197,059

$197,059

$1,477,505

$1,477,505

$23,411

$6,979,226

3

Depreciation

Allocation

$5,280

$41,420 

$0 

$139,710 

$150,068 

$50,023

$27,910 

$892,815 

$1,307,226 

4

Debt

Retirement

$234,078 

$175,000

$409,078

5

Closure &

Post-Closure

$268,000

$268,000

6

Admin.

Allocation

($1,025,711)

($5,280)

$145,780

$26,650

$266,133

$218,502

$70,153

$34,133

$255,923

$4,055

7

Container

Repair

$9,541 

$22,898

($190,818)

$104,950

$38,164

$9,541

$3,816

8

Roll-Off

Services

$17,153

$31,448

($405,013)

$324,010

$32,401

9

Adjusted Full

Cost

$0 

$0 

$56,936

$1,086,963 

$145,780 

$9,541 

$400,663 

$181,650 

$70,231 

$19,281 

$75,017 

$143,380 

$41,420 

$180,506 

$26,650 

$153,856 

$0 

$1,965,192

$266,133 

$22,898 

$1,536,451 

$139,710 

$1,544,165

$218,502 

$1,064,505 

$104,950 

$6,140 

$150,068 

$482,350

$70,153 

$38,164 

$324,010 

$50,023 

$301,044 

$34,133 

$9,541 

$32,401 

$197,059 

$27,910 

$3,307,137

$255,923 

$3,816 

$1,477,505 

$892,815 

$234,078 

$175,000 

$268,000 

$27,466 

$8,951,759
TABLE 6: DERIVATION OF COST-BASED RATES FOR SERVICES (FY 1998)

1 2 3 4 5 6 7 8 9

SERVICE Adjusted Cost Service Cost Adjusted Service Tons Processed Landfill Adjusted Service Cost Per Ton Cost Per Res. 

Cost Center (from Table 5) Re-Allocation Costs Allocation Cost Unit 

RECYCLING $1,086,963 ($335,363) $751,600 5,001 $751,600 $150.30 $1.99 

Administration $145,780

Container Repair $9,541

Curbside $400,663 $465,588 686 $679.01 $1.23

Drop-Offs $181,650 ($220,998) 1,513 

Volunteer $70,231 $80,068 $0.21

Program

White Goods $19,281 $23,216 95 $243.56 $0.06 

HHW $75,017 ($x114,365) 62 

Yard Trimmings $143,380 $182,728 2,645 $69.08 $0.48 

Depreciation $41,420

COMPOSTING $180,506 ($180,506) $0 

Administration $26,650 

Composting $153,856 

Depreciation $0 

RESIDENTIAL $1,965,192 $0 $1,965,192 21,869 $654,793 $2,619,986 $119.80 $6.93 

Administration $266,133 

Container Repair $22,898 

Residential $1,536,451 

Depreciation $139,710 

COMMERCIAL $1,544,165 $0 $1,544,165 25,523 $764,200 $2,308,364 $90.44 

Administration $218,502 

Commercial $1,064,505 

Container Repair $104,950 

Downtown $6,140 

Containers

Depreciation $150,068 

ROLL-OFF $482,350 $0 $482,350 18,261 $546,764 $1,029,114 $56.36 

Administration $70,153 

Container Repair $38,164 

Roll-Off $324,010 

Depreciation $50,023 

MISSOURI $301,044 $0 $301,044 5,432 $162,643 $463,687 $85.86 

UNIVERSITY

Administration $34,133 

Container Repair $9,541 

Roll-Off $32,401 

Missouri University $197,059 

Depreciation $27,910 

LANDFILL $3,307,137 $515,869 $3,823,006 56,597 $1,694,606 $1,694,606 $29.94

Administration $255,923

Container Repair $3,816

Landfill $1,477,505

Compost $180,506

Drop-Off Recycling $220,998

HHW $114,365

Depreciation $892,815

Interest Expense $234,078

Debt Retirement2 $175,000 

Closure & 

Postclosure $268,000

LARVACIDING $27,466 $0 $27,466 $27,466

TOTALS $8,894,823 $0 132,683 $3,823,006 $8,894,823 $8.92 

22 2 Debt retirement is financial data that are generally not considered relevant to FCA. ■
INTRODUCTION

A combination of regional and local issues

motivated Glendale, Arizona, to begin using FCA

in the early 1990s. Increased regional competition from nearby, privately owned landfills with

lower tip fees resulted in a substantial reduction

in waste flow to the Glendale landfill between

1990 and 1995. Consequently, Glendale's landfill

tip fee revenues dropped by 50 percent. Faced

with the prospect of increasing local service

rates—which were already among the highest in

the region—in order to offset revenue losses,

Glendale developed an FCA system to isolate the

important relationship among landfill costs, tip

fee revenues, and the rates for both collection

and disposal services. Glendale's FCA system has

enhanced and improved the cost and efficiency

of its solid waste system so that it now has the

lowest residential solid waste service rate in the

region.

Glendale's use of FCA also was motivated by

a need to develop long-term reserves and financial plans for its integrated solid waste system.

In the late 1980s, approximately $600,000 in

landfill reserve funds was absorbed by the general fund because the department did not have a

well articulated long-term spending plan.

Today, the department uses its FCA system to

ensure the existence of long-term reserve funds

and to justify the need for such funds.

BACKGROUND

Located in the "Valley of the Sun," just west

of Phoenix, Glendale is Arizona's fourth largest

city. During the 1980s, Glendale's population

grew by 52 percent, an expansion that continued

during the 1990s. The sanitation and landfill

divisions of the Field Operations Department

handle solid waste management operations in

Glendale. The department is a full-service solid

waste management agency, utilizing contractors

only for secondary sorting of recyclables and for

sorting and processing of household hazardous

waste (see Table 7 on page 27 for additional

details on services and facilities provided by the

department). The Sanitation Division provides

trash collection services to all single and multifamily households and select businesses on a

competitive basis. The Landfill Division operates

the city's landfill and recovery operations. In

total, the Field Operations Department has 72

employees, including five administrative and

managerial staff.

The sanitation and Landfill Divisions' total

combined budget was just over $13 million in

FY 1996. The largest budget category was its

residential (curbside) service operation

($6,020,141), followed by the sanitary landfill

budget ($4,285,568), and the commercial (container) service budget ($3,224,527). Two selfsustaining enterprise funds, the Landfill Fund

and the Sanitation Fund, generate revenues to

cover budgeted expenditures. The Landfill

Fund covers the costs of operating the landfill

and associated facilities. This fund derives nearly 88 percent of its revenues from landfill tip

fees. The Sanitation Fund covers residential and

commercial collection costs. Its revenues are

derived almost exclusively from the monthly

fees charged to residential homes and apartments and commercial establishments.

Revenues from the two funds totaled more than

$14 million in FY 1996. A breakdown of revenue sources for the combined funds is shown

in Figure 3 on page 24.

23

4.City of Glendale, Arizona

Field Operations Department

%

+ $

–

Demographic Characteristics 

City of Glendale, Arizona

Population (1990) 180,038

Area (square miles) 52

Density (persons per square mile) 3,462

Households 68,604

Household Income (1989 $) $35,769

Housing in 1- to 4-unit structures 50%
FCA IN GLENDALE

Glendale developed three FCA-based tools

to identify cost-based rates for services and

evaluate long-term cost and revenue impacts

associated with system and service changes.

These tools include a rate model, landfill funding model, and solid waste financial plan. 

The rate model is a custom software application the department uses to develop and analyze rates over a short-term period (i.e., 5 years

or less). Revenue and detailed capital and operating costs are organized in the rate model by

fund and functional cost centers. For example,

the Sanitation Fund, which generates revenues

through monthly service fees, includes residential and commercial collection cost centers (see

text box at left). The rate model allows the Field

Operations Department to integrate all of its cost

and revenue centers in a single framework, so it

can analyze cost and revenue impacts associated

with system and service changes over time. 

The landfill funding model helps the department account for long-term costs associated

with the landfill. Input data in the model consist of engineering estimates of future cash outlays that will be required for closure and postclosure. Output data from the landfill cost

model consist of estimates of the annual

amount the department will have to set aside

over the useful life of the landfill in order to

cover all long-term outlays (see Table 8 on page

28 for a detailed description of parameters 

24

Cost Centers in the Glendale

Rate Model

1. Sanitation Fund Cost Centers

■ Commercial Collection

■ Residential Collection

2. Landfill Fund Cost Centers

■ Sanitary Landfill

■ Gas Management

■ Recycling

■ Wood Waste Recovery

FIGURE 3: GLENDALE'S SOURCES OF REVENUE (FY 1996) 

(TOTAL REVENUE = $14 MILLION)

RESIDENTIAL RATES 42%

COMMERCIAL RATES 24%

TIP FEES 30%

INTEREST INCOME 4%
considered in the landfill cost model). Output

from the landfill cost model also is used as

input in the rate model. 

The Field Operations Department's financial

plan is used for long-term planning and decision-making. It is the key mechanism through

which the department discusses broad financial

issues with city financial officials. These issues

include long-term needs for cash infusions,

investment strategies, and other issues pertaining to the department's financial needs. The

financial plan is shaped in part by the output

from the department's rate model and landfill

funding model. For example, whereas the rate

model is used to assess costs, benefits, and rate

impacts associated with adding a new service,

the financial plan is used to outline a strategy

for financing the new service. 

FCA IN ACTION: ANALYZING OPTIONS FOR

RESIDENTIAL RATE RELIEF 

The department uses the FCA tools described

in the preceding section to develop cost-based

rates for services and evaluate long-term cost

and revenue impacts associated with system

and service changes. To illustrate this process,

this section describes how the department

recently used its FCA system to evaluate the

cost, revenue, and subsequent rate impacts associated with entering into landfill service agreements with nearby communities.

Between 1990 and 1995, waste disposed of at

Glendale's landfill by sources outside the city

declined substantially due to increased competition from nearby privately owned landfills

with lower tip fees. By 1995, only 25 percent of

landfill revenues were from non-city sources.

Because more than half of the city landfill's

costs are fixed, this decrease in revenue placed

pressure on the Field Operations Department to

either raise service rates or find alternative

sources of revenues. 

The department used its rate model and

associated landfill funding model to identify

and evaluate costs and benefits associated with

alternative revenue sources. In particular, the

department was interested in the possibility of

entering into long-term service agreements with

surrounding communities to dispose of an additional 50,000 to 200,000 tons of waste at the

city landfill. The landfill funding model indicated that handling the additional volume of

waste would only decrease the 50-year service

life of the landfill by a maximum of 3 years. 

The rate model was used to analyze shortand long-term costs (the latter calculated in the

landfill funding model) associated with importing 75,000 additional tons per year. The rate

model results suggested that the additional

75,000 tons of waste would result in a $247,000

increase in annual landfill costs, which would

be more than offset by annual tip fee revenues

of $1.3 million. The $1.1 million revenue surplus would allow Glendale to:

■ Provide competitive tip fees of approximately $20 per ton for waste from surrounding

communities instead of the $26 per ton that

would be needed to cover costs without the

imported tonnage.

■ Provide tip fees of $19.73 per ton for waste

collected by Glendale sanitation vehicles

instead of the $24 per ton that would be

needed to cover fixed costs without the

imported tonnage.

■ Lower a planned monthly increase in

Glendale customer service rates from $0.90

per household to $0.25 per household and

eliminate rate increases for a multiyear 

period. Residents paid $10.75 per month in

FY 1998.

Based on this analysis, the city council

directed the Field Operations Department to

execute long-term landfill agreements with two

nearby communities. These agreements provide

for an additional 65,000 tons of waste disposed

of at the city landfill annually over a 5-year

period.

LESSONS LEARNED

Increased competition and a desire to more

clearly articulate long-term cost and revenue

structures in order to sustain reserve funds

motivated Glendale to develop three interrelated FCA tools: the rate model, the landfill funding model, and the financial plan. These tools

are used in combination to inform short-term

rate making and long-term financial planning

25
functions such as those shown in the text box

above. FCA helped the department shape and

develop new solid waste policies by addressing

the needs of both its city council members—

who are chiefly concerned with keeping residential rates as low as possible—and its staff,

who must consider and justify the need for both

short- and long-term expenditures. 

Based on its experience with FCA, Glendale

offers the following advice:

■ Allow sufficient time to develop data collection procedures. Glendale spent approximately 2 years developing a data collection protocol that captured the correct data for its FCA

tools. The city found that data collection is

the most critical staff-training element.

■ Ensure that senior management is committed

to FCA. FCA requires a substantial up-front

commitment of staff time for training and

implementation. Therefore, top level managerial support is required.

■ Before implementing an FCA system, identify

an issue of local concern that can be

addressed by FCA. Identifying a specific

issue to address with FCA can facilitate

development of a standard analytical structure and data collection protocol. 

■ Involve consultants with the development

and implementation of FCA tools. Glendale

used private consultants to help develop its

rate model, landfill funding model, and

financial plan. Consultants also provided the

Field Operations Department with the

detailed financial expertise it needed to

develop its FCA approach. 

CONTACT:

Mike Hoyt, Director

Field Operations Department 

6210 West Myrtle Avenue, Suite 111

Glendale, AZ 85301

Phone: 602 930-2602

E-mail: hoyt@ci.glendale.az.us

26

Other Uses of FCA in Glendale,

Arizona

■ Decreasing residential service rates by entering

into long-term solid waste service agreements

with nearby communities. Glendale has the

lowest single family residential MSW service

rate in the Phoenix metropolitan area.

■ Evaluating cost-effective options for expanding

recycling services. The city is currently using

an FCA approach to evaluate the cost and

rate impacts of five separate service options

for recycling. 

■ Creating a landfill development plan that maximizes site life while minimizing cost. The city is

in the process of revamping its long-term plan

for the landfill to consider long-term cost

impacts associated with recreational end-uses

of the landfill site.

■ Expanding commercial collection services.

Glendale is using FCA to evaluate and revamp

commercial rate structures so that they take

into account economies of scale associated

with providing collection services to larger

commercial accounts.
27

TABLE 7: GLENDALE FIELD OPERATIONS SUMMARY OF SERVICES AND

FACILITIES 

Solid Waste

Services and

Facilities

Recycling Programs

Wood and Yard

Trimmings Recovery

HHW

Bulky Item

Collection

Residential Trash

Commercial Trash

Transfer Stations

Landfills

Other Solid Waste

Management

Services

Other Facilities

Service

Provider

A=Agency

C=Contract

A and C

A

A and C

A

A

A

N/A

A

A

A

Tonnage

Managed

2,000

6,000

N/A

20,442

83,000

63,000

N/A

214,100

469

N/A

Comments

Transports recyclables from 17 drop-off sites to a

central location for sorting. Private recycling companies process sorted recyclables.

Accepts yard trimmings at the landfill and processes

as part of a green waste recycling program. Accepts

Christmas trees at drop-off sites seasonally. Wood is

separated from incoming loads, processed, and sold.

Provides HHW drop-off 1 day each year. Provided a

week-long curbside collection service for HHW in

1997. Private contractor sorts, classifies, packages,

and arranges for transportation of HHW.

Collects residential bulky items monthy, including tree

limbs and brush, furniture, and appliances. Residents

also can bring bulky materials (about 12,500 tons

from 1996 to 1997) to the landfill throughout the

year at no cost.

Provides automated trash collection to all 41,778

residential customers twice weekly. Residents paid

$10.50 monthly from 1996 to 1997. 

Provides container services to all multifamily

dwellings and bin or roll-off service to commercial

establishments on a competitive basis with private

haulers. Serves 1,400 to 1,500 clients annually

through this program.

Closed transfer station from 1995 to 1996. Site is

now used for recycling sorting operations.

Operates landfill with approximately 50 years of

remaining capacity. From 1996 to 1997, the tip fee

for the city's sanitation vehicles was $24.25 per ton.

Provides annual residential "Spring Cleanup" and

dead animal collection.

Maintains a lot and building for collection vehicles.
TABLE 8: FACTORS CONSIDERED IN GLENDALE LANDFILL FUNDING MODEL

Any year from 1996 through 2055.

Projected annual tonnage disposed of in the landfill plus engineering

estimate of fill.

Engineering estimate of tonnage capacity remaining in the landfill at the

beginning of the fiscal year.

Beginning capacity minus tonnage disposed of.

Beginning capacity, tonnage disposed of, and engineering estimate of

fill.

Engineering estimate of total tonnage capacity available over the life of

the landfill.

Cumulative tons in place at the end of any given year divided by lifetime

landfill capacity.

Engineering estimate based on hydroseeding costs, closure certification,

cover system construction costs, quality assurance, and quality control.

Total costs are estimated in 1996 dollars and inflated at an annual rate

of 3 percent.

Cumulative percent capacity filled (in any given year) multiplied by total

closure cost estimate.

Annual amount spent on closure costs.

The sum of all previous and current annual closure expenditures during

any given year, assuming an annual inflation rate of 3 percent.

Accrued closure costs minus inflation-adjusted cumulative closure expenditures.

Engineering estimate based on postclosure costs and long-term care

costs. Total costs are estimated in 1996 dollars and inflated at an annual

rate of 3 percent.

Cumulative percent capacity filled (in any given year) multiplied by total

postclosure cost estimate.

Accrued closure liability plus accrued postclosure liability in any given

year during the landfill's expected lifetime.

28

Fiscal Year

Tonnage Disposed

Beginning Capacity

Ending Capacity

Cumulative Tons in Place

at End of Year

Lifetime Landfill Capacity

Cumulative Percent

Capacity Filled

Total Closure 

Cost Estimate

Accrued Closure Costs

Annual Closure

Expenditures

Inflation Adjusted

Cumulative Closure

Expenditures

Remaining Accrued

Closure Liability

Total Postclosure Cost

Accrued Postclosure

Liability

Total Remaining Accrued

Closure and Postclosure

Liability
INTRODUCTION

The Indianapolis, Indiana, Solid Waste

Division began using FCA in 1993 as part of a

citywide effort to provide the highest quality

public services to residents at the lowest cost.

The division began using FCA to facilitate the

adoption of market mechanisms—particularly

competitive bidding by public employees for

solid waste collection contracts.

Since the division began competing against

private haulers to provide trash collection services, the city's solid waste costs have

decreased by more than $5 million. The division relied on FCA to develop successful competitive bids that have resulted in these cost

reductions. Experience in Indianapolis shows

that FCA can be instrumental in helping public

agencies succeed in a competitive market. 

BACKGROUND

Indianapolis is located in Marion County, in

central Indiana. In 1970, many city and county

government functions were combined, creating

a "consolidated city." The consolidated city,

which includes most of the municipalities in

Marion County, explains many of the city's

demographic features including size, population

density, and housing mix (see text box above). 

The Department of Public Works (DPW) is

one of six governmental departments in the

consolidated city. DPW is responsible for

administering all public and private service

contracts through its Contract Compliance

Division. DPW's Solid Waste Division provides

a range of residential solid waste services on a

competitive basis. The Solid Waste Division has

approximately 110 operations staff, all of whom

are union employees, and 13 administrative

staff. 

The Solid Waste Division functions primarily

as a collection service provider that actively

competes with private haulers to provide solid

waste services to city residents. The consolidated city is divided into 12 trash collection districts. Two of the 12 districts receive public collection services, while the remaining 10 districts are subject to a competitive bid process.

To enhance competition, the city does not allow

a single hauler to serve more than 3 districts

within the 10 districts that are subject to competitive bid processes. Currently, the Solid

Waste Division provides collection services to 3

districts in the 10 districts competition zone, as

well as the 2 public collection districts. In total,

the 5 districts to which the division provides

hauling services represent nearly half of the

consolidated city's population. The division

also provides trash collection for public housing

and special events, offers drop-off services for

recyclables, operates a transfer station, and provides cleanup after numerous special events.

Residents seeking curbside recycling services

contract individually with private haulers. 

DPW also contracts for essentially all trash

processing services, including the operation of a

waste-to-energy facility where much of the

city's trash is processed. Table 9 on page 33 provides a summary of solid waste management

services and facilities provided by the division,

and the tonnage of waste managed. 

29

5.City of Indianapolis, Indiana 

Solid Waste Division

%

+ $

–

Demographic Characteristics

City of Indianapolis, Indiana

Population (1990) 741,592

Area (square miles) 373

Density (persons per square mile) 1,989

Households 296,297

Household Income (1989 $) $29,000

Housing in 1- to 4-unit structures 72%
Solid waste management services in

Indianapolis are financed through the following

two funds:

■ The Sanitation Solid Waste Fund supports

collection services offered by the city and is

financed primarily through property taxes

and other revenue such as limited service

fees for bulky waste, special events, and dead

animal collection. Budgeted expenditures for

this fund were approximately $20.1 million

in 1997. 

■ The Solid Waste Disposal Fund is an enterprise fund that supports processing and disposal fees and is financed largely through a

solid waste user fee of $32 per household per

year. Budgeted expenditures for this fund

were about $5.2 million in 1997. 

A breakdown of the division's sources of revenue is provided in Figure 4 below.

FCA IN INDIANAPOLIS

The Solid Waste Division uses a customized

spreadsheet application to develop its cost and

bid information. More than 100 separate costs

are allocated to 10 basic division service categories (see the text box on page 31) using a twostep process:

1. Directly assigning costs associated with a single category to that category. This step

accounts for more than $20 million of the

division's approximately $25.7 million in full

costs.

2. Spreading other major costs among categories

based on well-defined cost allocation procedures.

The Solid Waste Division organizes costs

into one of five general cost categories: personnel expenses, supplies, contracts and other

costs, equipment, and nondivision administrative costs (see Table 10 on page 34). 

30

FIGURE 4: INDIANAPOLIS' SOURCES OF REVENUE (1997) 

(TOTAL REVENUE = $25.3 MILLION)

OTHER REVENUE 9%

SOLID WASTE USER FEE 26%

PROPERTY TAXES 65%
Specifically, the division: 

■ Assigns personnel expenses, including both

salary and non-salary expenses (i.e., costs

such as workers compensation and social

security taxes), directly to services. 

■ Allocates costs for supplies primarily in proportion to direct labor hours provided for

each service. 

■ Assigns approximately $15 million in contract costs directly to specific division service categories based on current contract

arrangements. 

■ Assigns equipment costs, primarily for collection vehicles, to service categories based

on equipment usage rates by service categories. 

■ Allocates fleet service costs in proportion to

tonnage collected by each vehicle (or percent

of total tonnage collected). 

■ Allocates $1,129,533 in administrative

charges in proportion to the direct labor

hours provided for each service.

In addition to this cost information, the

spreadsheet includes performance factors such

as the tonnage collected, number of houses serviced, and the number of crew members or

vehicles on route. This information helps the

division develop performance indicators that

track cost impacts associated with specific

changes in performance. The division, for example, can calculate the full cost of collecting from

a specific collection district and provide a corresponding service "output" (i.e., houses serviced or tons collected).

FCA IN ACTION: DEVELOPING COMPETITIVE

PUBLIC SOLID WASTE SERVICE BIDS AND

CONTRACTS 

The Solid Waste Division began using FCA

in 1993 in response to a government reform

process instituted by the city's new mayor. To

ensure that taxpayers' dollars were being spent

as wisely as possible, the mayor pledged to

"provide customers with a dollar's worth of service for every dollar it takes in taxes." The

mayor also promised to engage city agencies in

a "comprehensive effort to link costs and outcomes and create a budget that [city] customers

could easily review." To follow through on

these promises, city officials were required to

identify each service provided, determine the

full cost of that service, analyze options for

reducing costs and/or increasing service quality,

and explain the results to the city's residents

and businesses. In addition, some city agencies

were required, for the first time, to compete

against private service providers to win city

contracts for services.

In 1993, Indianapolis made residential trash

collection an area of public-private competition.

Before 1993, densely populated portions of the

urban core received solid waste services from

the division, while residents living in outlying

areas contracted individually with private

haulers. When competition was introduced, the

consolidated city was divided into 12 collection

districts. Two of the 12 districts would continue

to receive public collection services, while the

remaining 10 districts were subject to a competitive bid process. 

FCA helped the Solid Waste Division develop a competitive bid by revealing opportunities

for improving performance and streamlining

costs. For example, FCA revealed that certain

indirect supervision costs were excessive and

could be reduced or eliminated. In addition,

FCA helped the division link performance indi31

Indianapolis FCA Information

SERVICES FULL COST

Residential Trash Collection:

Manual $14,795,360

Automated $2,501,287

Heavy Trash $1,063,193

Illegal Dumping $215,311

Special and Support Services $1,129,533

Dead Animal Collection $125,677

Emergency Disposal $306,261

Leaf Diversion $662,546

Drop-Off Recycling $1,211,052

Final Disposal $3,741,879

Total $25,752,099
cators and costs so it could accurately determine costs for fixed levels of service (i.e., costs

of providing collection services to a welldefined collection district). 

The Solid Waste Division won contracts with

the city in three collection districts—the maximum number of open districts that could be

served by a single service provider. After winning the collection contracts, the division realized a 30 percent improvement in performance

based on the number of houses served daily.

During the year following the advent of competition, increased efficiency and cost reduction

measures reduced the Solid Waste Division's

budget by $5.1 million. 

LESSONS LEARNED

With the exception of Indianapolis, the subjects of these case studies all receive the majority of their income from fees and payments related to the provision of solid waste management

services. This gives the other case study subjects a clear financial incentive to control the

cost of their services. Indianapolis receives the

majority of its revenues from property taxes, not

fees. The impact of this funding arrangement,

however, must be considered in the context of

the city's overall commitment to efficiency in

government. For Indianapolis, maximizing the

efficient use of taxpayer dollars through competition is, in fact, a major reason for the use of

FCA.

In Indianapolis' case, FCA has proven useful

in fostering public-private competition, resulting in both lower costs and improved performance. Based on its experience with FCA, the

Solid Waste Division offers the following advice

for other communities: 

■ Solicit technical support, if needed, for staff

training, data development, and development of an appropriate FCA system.

Consultants familiar with the FCA approach

and its requirements were useful during the

start-up phase, assisting in both data development and staff training. 

■ Focus on implementing FCA concepts and

data development procedures to ensure the

FCA system is understood and being used.

As the division's use of FCA evolved, it 

abandoned the original proprietary software

application provided by a consultant in favor

of a customized spreadsheet application it

can support and maintain with in-house

staff.

■ Recognize that using FCA often leads to

innovations and the adoption of other best

management practices and tools. Once the

division knew its costs, it naturally became

interested in improving performance. This,

in turn, led to the division's use of other

tools and approaches such as geographic

information systems for route optimization. 

CONTACT:

Charles Bardonner, Director, or

Stephanie Stevenson, Finance Manager

Solid Waste Management Division

2700 South Belmont Avenue

Indianapolis, IN 46221

Phone: 317 327-5684

E-mail: sstevens@indygov.org

32

Other Uses of FCA in 

Indianapolis, Indiana

■ Developing an incentive-based compensation

system that shares the benefits of increased efficiency and productivity with division workers. 

■ Rebidding collection service contracts. The division has developed a custom spreadsheet

application for future city bid processes based

on lessons learned during the initial bid

process. 
33

TABLE 9: INDIANAPOLIS SUMMARY OF SOLID WASTE SERVICES 

AND FACILITIES 

Solid Waste

Services and

Facilities

Source Reduction

and Recycling

Outreach

Recycling Drop-Off

Programs

Leaf Composting

HHW

Bulky Item

Collection

(Division Tonnage

Only)

Residential Trash

(Division Tonnage

Only)

Institutional Trash

Other Solid Waste

Management

Services

Emergency Disposal

Response

Waste-to-Energy

Facilities (Includes

non-city waste)

Transfer Stations

Landfills

Service

Provider

A=Agency

C=Contract

A

A and C

A and C

A and C

A

A

A

A

A

C

A and C

C

Tonnage

Managed

N/A

9,000

6,594

N/A

9,319

119,367

4,581

N/A

N/A

677,000

N/A

Monofill: 

175,275 

Landfill: 

8,300

Comments

(All tonnage estimates and comments relate to

division service unless otherwise noted.)

Division and DPW develop public service announcements, publish information and promotional materials, and present school and media programs.

Division transports recyclables from 30 drop-off sites

to a private facility.

Division collects leaves each fall and transports to a

private compost facility. 

DPW provides residential drop-off services yearround. A private contractor handles the HHW

received (7,000 participants in 1996).

Division collects heavy trash once per month. Each

household may set out up to two bulky items on

heavy trash days, including items containing chlorofluorocarbons. 

Division collects from all low-density housing and

from designated multifamily structures generally containing no more than 10 units.

Division collects garbage from public housing, parks,

and city departments.

Division provides dead animal collection; collects

from neighborhood clean-ups, parades, and other

events; and investigates illegal dumping. 

Division responds to emergency city disposal needs,

including storms, tornadoes, snow removal.

DPW administers contract with the operator of wasteto-energy facility, the Indianapolis Resource Recovery

Facility (IRRF). This facility receives waste from non-city

sources as well. 

Division owns one small transfer station in

Indianapolis; residents can leave materials there for a

small fee. Operation of facility is contracted to private

service provider.

DPW provides monofill for disposal of ash from the

IRRF. The monofill tonnage noted here includes ash due

to all sources of waste brought to the IRRF. The city also

utilizes a private landfill for disposing of bulky materials.

City crews collect the landfilled tonnage noted.
TABLE 10: INDIANAPOLIS SOLID WASTE DIVISION FCA SUMMARY INFORMATION (FY 1997)3

3 Some of the data in this table merit further explanation. There are no regular salary costs associated with emergency disposal response and leaf diversion because these are

seasonal activities with no regular personnel assigned; all of these activities are carried out on employee overtime. In addition, costs for utilities and insurance premiums areassigned to manual trash collection. Costs for fleet services are allocated based on vehicle usage. Administrative costs for cost incurred by other city department's on behalf of

the Solid Waste Division are assigned to all division budget categories except for drop-off recycling since all nondivision costs associated with drop-off recycling are directlyassigned.

34

Manual Automated Heavy Illegal Leaf Drop-Off Final Solid Special and Dead Emergency TOTAL

Trash Trash Trash Dumping Diversion Recycling Waste Support Animal Disposal

Collection Services Disposal Services Collection Response

Personnel Expenses

Salaries $1,743,949 $375,923 $132,463 $27,356 $0 $132,464 $172,268 $405,779 $48,024 $0 $3,038,226Performance Incentive $56,700 $10,500 $3,500 $700 $0 $3,500 $6,000 $11,900 $1,400 $0 $94,200Overtime $168,287 $32,054 $18,275 $9,000 $50,000 $16,000 $4,000 $33,614 $4,000 $100,000 $435,230Other Personnel Costs $502,583 $133,117 $55,612 $15,970 $8,891 $48,238 $42,481 $122,684 $15,456 $7,114 $952,146

Supplies

Medical and Food Supplies $16,421 $0 $0 $0 $0 $0 $2,000 $0 $0 $0 $18,421

Office and Computer $11,068 $2,000 $0 $0 $0 $2,800 $62,359 $2,000 $0 $0 $80,227

SuppliesBuilding Supplies $10,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $10,000Other Supplies $16,500 $1,000 $1,000 $2,000 $0 $0 $52,000 $2,000 $0 $0 $74,500

Contracts and Other Costs

Waste Collection/Disposal $10,628,374 $1,100,000 $500,000 $10,000 $500,000 $250,000 $2,722,757 $100,000 $39,000 $0 $15,850,131Temporary Services $80,000 $0 $0 $0 $0 $0 $10,000 $0 $0 $0 $90,000Utilities $76,996 $0 $0 $0 $0 $0 $0 $0 $0 $0 $76,996Insurance Premiums $89,652 $0 $0 $0 $0 $0 $0 $0 $0 $0 $89,652Postage and Freight $30,640 $0 $5,000 $0 $0 $5,000 $16,269 $0 $0 $0 $56,909Other Costs $117,000 $8,227 $0 $60,000 $0 $0 $491,084 $8,000 $0 $0 $684,311

Equipment

Vehicles $375,000 $420,000 $184,000 $25,000 $0 $255,000 $0 $118,000 $0 $125,000 $1,502,000Other Equipment $70,280 $210,750 $0 $0 $0 $50,000 $27,000 $201,000 $0 $0 $559,030

Nondivision Costs

Fleet Services $743,298 $178,391 $148,660 $59,464 $74,330 $104,062 $0 $104,062 $14,866 $59,464 $1,486,597Administrative Charges $58,612 $29,325 $14,683 $5,821 $29,325 $343,988 $133,661 $20,514 $2,931 $14,683 $653,543

TOTAL $14,795,360 $2,501,287 $1,063,193 $215,311 $662,546 $1,211,052 $3,741,879 $1,129,553 $125,677 $306,261 $25,752,099

■
INTRODUCTION

The Southeastern Public Service Authority of

Virginia (SPSA) began using FCA in the mid

1980s. As SPSA operates under a 50-year sunset

provision, which requires that all debt obligations be paid off by 2017, it initially relied on

FCA to guide the allocation of debt service costs

to its services and facilities. It then set prices to

recover these costs.

In the 1990s, SPSA faced increased competition for waste from private landfills in the

region. Using its FCA system, SPSA was able to

identify strategic pricing and investment

options, which allowed it to keep waste flowing

to its facilities. Recently, SPSA used FCA to

evaluate the options for obtaining additional

landfill capacity. 

BACKGROUND

SPSA is one of six regional solid waste

authorities in Virginia. It was formed in the

mid-1970s by an act of the state legislature to

provide southeastern Virginia with economical

and environmentally sound solid waste services. SPSA member communities are the cities

of Chesapeake, Franklin, Norfolk, Portsmouth,

Suffolk, and Virginia Beach and the counties of

Isle of Wight and Southampton (see text box at

right). A board of directors appointed by the

member communities governs the authority.

Approximately 10 percent of SPSA's staff (50

out of 498 staff) provide administrative and

managerial support; the rest of the employees

are involved directly with SPSA's solid waste

operations, which include collecting recyclables

and processing and disposing of trash.

To provide its recycling and trash services,

SPSA operates an integrated solid waste management system that includes eight transfer stations and a regional landfill. SPSA also owns a

refuse-driven fuel (RDF) plant and operates an

RDF-fueled electricity and steam generating

plant, under contract to the U.S. Navy. Table 11

on page 39 provides a summary of the solid

waste management services and facilities provided by SPSA.

Because SPSA is an independent public

authority, it does not have access to "General

Fund" revenues to cover its costs. SPSA's operations are funded by tip fees, payments for RDF

and recyclables, income from its contract for

operating the Navy power plant, and several

other small sources of revenue. A breakdown of

SPSA's revenue sources is shown in Figure 5 on

page 36. As the figure shows, tip fees are

SPSA's most important revenue source. 

FCA AT SPSA

After SPSA was established, the authority

developed a budgeting system that allowed it to

accurately track the operating costs of each of

its services and facilities and the corresponding

income from tip fees and other sources. When

major facilities such as the RDF plant came on

line in the 1980s, SPSA recognized the need to

allocate debt service and overhead costs carefully among its facilities. This allocation would

ensure that costs and revenues could be balanced and that the authority's growing obligations for debt service were met. In 1987, the

need to allocate these costs led SPSA to modify

its budgeting system to accommodate FCA

information.

35

6.Southeastern Public Service

Authority of Virginia

%

+ $

–

Demographic Characteristics, 

SPSA

Population (1990) 1,012,789

Area (square miles) 1,999.9

Density (persons per square mile) 506

Households 352,313

Household Income (1989 $) $30,662

Housing in 1- to 4-unit structures 78%
SPSA computes the full cost of each of its

services and facilities as the sum of direct and

indirect costs. Direct costs consist of operating

costs and other costs that can be assigned to

specific services and facilities. Indirect costs,

which must be allocated among SPSA's various

services and facilities, include environmental

management, administration, and debt service

costs (as explained in the following paragraphs,

SPSA's treatment of debt service comports with

the accrual accounting conventions). A summary of SPSA's FCA information for its RDF plant,

curbside recycling service, and compost facility

is provided in the text box on page 37. Table 12

on page 40 and Table 13 on page 41 provide

complete full cost data for each of SPSA's services and facilities. The FCA information presented here is based on SPSA's FY 1995 budget.

This is the authority's most recent publicly

available data and provides a representative

example of the authority's current costs. 

SPSA's debt service costs comprised 35 percent of SPSA's FY 1995 budget. Because of the

"sunset provision", all debt must be paid by

2017. In order to meet this obligation, SPSA

must allocate debt service costs carefully among

its facilities and services and then recover the

costs through fees and charges. Initially, SPSA

allocated these costs based on the original cost

of the assets associated with each service or

facility. The use of original cost, however, can

lead to situations where equipment, such as a

fleet of trucks which has been fully depreciated

and replaced, continues to be assigned responsibility for debt service costs. To resolve this

problem, SPSA adopted net cost (i.e., original

cost less depreciation) as the basis for the allocation of debt costs. The use of net cost ensures

that fully depreciated equipment is not assigned

any responsibility for debt service costs. This

practice has also helped SPSA to structure

financing terms that are more consistent with

the life of the equipment or resources being

36

FIGURE 5: SPSA'S SOURCES OF REVENUE (1995) 

(TOTAL REVENUE = $58 MILLION)

RFD SALES 8%

INTEREST 

EARNINGS

2%

MISCELLANEOUS

3%

RECYCLABLES INCOME 2%

NAVY POWER PLANT CONTRACT

REIMBURSEMENT

RE-APPROPRIATION 18%

4%

TIP FEES 63%
37

financed such that SPSA debt service payments

are more consistent with what its depreciated

capital and equipment costs.

SPSA's allocation of debt service costs based

on net cost is consistent with the way in which

SPSA currently structures its financing. To

receive the best market rates, SPSA finances

groups of assets. The terms of the financing permit SPSA to structure its payments so that each

asset in the group is paid for over its individual

useful life. This financing approach is a form of

accrual accounting that recognizes and recovers

costs over the useful life of the asset.

FCA IN ACTION: COMPETING FOR WASTE

As a consequence of increased competition

during the 1990s, throughput at SPSA's RDF

plant declined 20 percent between 1994 and

1995. This reduction created problems because

SPSA is contractually obligated to provide certain minimum quantities of RDF to fuel the Navy

power plant. Failure to do so could have led to

the loss of the Navy plant as a guaranteed consumer of the authority's RDF. SPSA developed

two responses to the reductions in throughput:

■ Reducing tip fees for commercial waste

haulers using SPSA facilities.

■ Adding a bulky waste shredder at the RDF

facility to allow a greater portion of waste to

be processed at the facility.

Both responses were based on analyses conducted using FCA.

Historically, SPSA has processed substantial

amounts of waste collected by commercial

haulers. After the loss of flow control, there was

increasing competition for this waste from the

region's private landfills. Analysis of unit costs,

with and without the commercial haulers'

waste, allowed SPSA to quantify the impact of

losing the commercial haulers' waste. For example, SPSA showed that loss of waste at the RDF

plant translated directly into higher per-ton

costs for debt and other fixed costs, driving unit

costs up. This meant that, with the loss of

waste, member communities would be charged

higher fees in order to cover SPSA's costs. SPSA

communicated the impact of lower throughput

to its member communities. Based on this information, SPSA and its members decided to

lower tip fees for commercial haulers. This pricing strategy has allowed SPSA to retain some of

the commercial haulers' waste.

During 1994 and 1995, the

amount of bulky materials in the

waste received at the RDF

increased. Bulky materials are problematic because the RDF plant cannot process bulky waste. Unless

bulky waste is pre-processed into a

size acceptable at the RDF plant, it

has to be landfilled. SPSA decided

to investigate the purchase of a

shredder, to reduce bulky waste to a size that

the RDF plant could process. SPSA's analysis

began with an estimate of the amount of currently non-processable waste that could be

made processable by a bulky waste shredder. It

then considered the capital costs of the shredder, including delivery of all equipment and

materials; contractor's overhead and profit; sales

and use taxes; and engineering, design, and

construction administration. It also considered

operating costs for the shredder, including electricity, fuel, spare parts, and additional personnel costs. These capital and operating costs

were compared to the revenues and avoided

costs that would result from use of the shredder; SPSA considered revenue from the additional RDF sold; avoided transportation costs

for bulky waste; and avoided landfill costs for

bulky waste. SPSA used its FCA data to develop

the avoided costs, ensuring that the shredder's

benefits reflected the full avoided cost of transportation and landfilling. SPSA estimated that

the payback period for investing in a bulky

waste shredder period would be less than 2

years, and therefore decided to go forward with

SPSA FCA Information

Cost RDF Curbside Compost

Plant Recycling Facility

Collection

Direct Cost $4,783,697 $2,132,002 $363,118

Indirect Cost $8,279,447 $1,280,877 $112,867

Total Cost $13,063,144 $3,412,879 $475,985
installation of the shredder. Based on actual

costs and throughput, SPSA now estimates that

the shredder will pay for itself at the end of 3

years of operation.

LESSONS LEARNED

Specific issues that have confronted the

authority, particularly the allocation of debt service costs, have guided FCA development and

use by SPSA. The following lessons learned by

SPSA also are related to these issues:

■ Financing term should match facility life.

Initially SPSA financed all of its capital

costs, including items such as trucks and

transfer stations that have very different useful lives, using the same 30-year bonds.

Difficulties in allocating debt service costs

arose because assets, such as the trucks, were

fully depreciated and retired from service

before the 30-year bonds were repaid. SPSA

now believes that it is more appropriate to

group assets by useful life and, to the extent

possible, to finance over the life of the assets.

This is essentially the same as accrual-based

accounting.

■ Correct allocation of costs can be quite difficult. SPSA did not find FCA technically difficult to implement. The Authority's staff

developed SPSA's FCA system by building

on existing management and data systems.

Outside consultants were not used. From

SPSA's perspective the challenge was not

developing the system. Rather, the challenge

was developing appropriate allocation methods for important, but difficult-to-allocate,

items such as debt service costs. 

■ Use of a facility-based budgeting system

makes FCA easier to implement. In part,

SPSA found implementing FCA easy because

the authority's budgeting system is organized

by facility. Facility-based budgeting in turn

provided the framework within which SPSA

could develop its cost allocation procedures.

■ FCA data are very useful when operating in a

competitive market. SPSA also has recently

used FCA to compare the cost of expanding

its own landfill with outside bids. SPSA's

analysis carefully documented the full cost

of the expansion and showed that its cost

was less than the outside bids. Based on

these results, SPSA's board authorized landfill expansion to meet its needs through

2015.

■ Use of FCA can improve pricing. SPSA has

learned that it can use its FCA data, particularly its unit cost data, to better understand

the cost of its services, and to improve pricing. Recently SPSA has focused its attention

on transportation costs, particularly for transfer stations. Using its FCA data, SPSA has

been able to pinpoint areas where it can

reduce transportation costs, and thereby

reduce the price of its services. Similar

efforts have led to reductions in labor costs.

Contact:

John Hadfield, Executive Director

Southeastern Public Service Authority

P.O. Box 1346 

Chesapeake, VA 23327-1346

Phone: 757 420-4700

38
39

TABLE 11: SPSA SUMMARY OF SERVICES AND FACILITIES 

Solid Waste

Services and

Facilities

Source Reduction

and Recycling

Outreach

Drop-Off Recycling

Curbside Recycling

HHW

Yard Trimmings

Mulching and

Composting

RFD Plant

Power Plant

Transfer Station

Regional Landfill

Virginia Beach

Landfill

Tire Shredder

Ferrous Metals

Recovery Facility

Service

Provider

A=Agency

C=Contract

A

A and C

A and C

A

A

A

A

A

A

C

C

C

Tonnage

Managed

(FY 1994-95)

N/A

2,080

11,000

4,133

N/A

516,172

367,055

531,754

392,361

179,442

N/A

11,000

Comments 

Offers a classroom-based environmental education

program.

Provides more than 35 drop-off locations in the

region and delivers recyclables to a private recycling

facility.

Provides voluntary curbside recycling collection to

148,800 households and delivers recyclables to a

private recycling facility.

Provides drop-off sites for HHW at transfer stations,

the landfill, and the RDF plant.

Operates yard trimmings mulching facility; all yard

trimmings materials are initially processed at this site.

A yard trimmings composting facility is located at the

regional landfill. Approximately 40,000 cubic yards

of mulch and compost are produced annually.

Operates an RDF plant on Navy land. Contracts with

the Navy to supply at least 25,000 tons of RDF per

month. A bulky waste shedder was recently installed

to increase throughput. 

Owned by the Navy but operated by SPSA. Fueled by

RDF from SPSA's plant. Provides steam and electricity

for the Navy.

Operates eight transfer stations in its service area. 

Owns and operates regional landfill that was opened

in 1985; only loads of waste that cannot be

processed at the RDF plant are landfilled (primarily

bulky items and construction and demolition materials). Development of new cells currently underway

will meet SPSA's need for landfilling through 2015.

Contracts with Virginia Beach for disposal of RDF

residue and power plant ash.

Shreds car tires and uses them for fuel at the power

plant; truck tires are sold to be used as feedstock in

the manufacture of industrial equipment tires.

Approximately 260,000 tires are processed annually.

Operation is contracted to the private sector.

Cleans and processes ferrous metals extracted from

the feedstock at the RDF plant. Operation is contracted to the private sector.
40

TABLE 12: SPSA ANALYSIS OF FULL COST: TRANSFER STATIONS, LANDFILLS, AND PLANTS

Regional Norfolk Chesapeake Franklin Ivor Boykins Isle Of Oceana Landstown RDF Plant Power Plant Virginia Total FULL COST Landfill Transfer Transfer Transfer Transfer Transfer Wight Transfer Transfer Beach Transfer Landfill

Direct CostOperating Cost $1,368,528 $482,788 $259,549 $95,414 $4,958 $28,271 $98,418 $214,656 $360,495 $4,205,364 $11,326,420 $1,674,350 $20,119,211Maintenance Shop $41,953 $11,642 $4,875 $683 $0 $0 $1,162 $6,151 $8,327 $39,048 $0 $0 $113,841Transportation Cost $20,735 $1,122,034 $410,069 $246,667 $10,757 $12,119 $188,407 $568,595 $837,105 $539,285 $531,016 $114,160 $4,600,949

Subtotal $1,431,216 $1,616,464 $674,493 $342,764 $15,715 $40,390 $287,987 $789,402 $1,205,927 $4,783,697 $11,857,436 $1,788,510 $24,834,001

Indirect CostTransportation $12,578 $680,613 $248,743 $149,626 $6,526 $7,352 $114,286 $344,904 $507,780 $327,125 $322,109 $69,249 $2,790,891Maintenance Shop $47,898 $13,291 $5,566 $781 $0 $0 $1,327 $7,023 $9,507 $44,581 $0 $0 $129,974Environmental Management $386,229 $39,972 $21,300 $5,690 $424 $573 $4,674 $20,925 $20,575 $366,793 $0 $0 $867,155Administrative Cost $148,431 $70,372 $37,602 $13,260 $0 $4,450 $13,139 $30,887 $52,517 $377,130 $726,999 $0 $1,474,787Debt Service $5,182,378 $867,512 $279,858 $149,406 $34,148 $54,680 $121,135 $269,205 $650,654 $7,163,818 $2,097,221 $844,380 $17,714,395

Subtotal $5,777,514 $1,671,760 $593,069 $318,763 $41,098 $67,055 $254,561 $672,944 $1,241,033 $8,279,447 $3,146,329 $913,629 $22,977,202

TOTAL $7,208,730 $3,288,224 $1,267,562 $661,527 $56,813 $107,445 $542,548 $1,462,346 $2,446,960 $13,063,144 $15,003,765 $2,702,139 $47,811,203

(Direct and Indirect)
TABLE 13: SPSA ANALYSIS OF FULL COST: DIVERSION SERVICES AND

FACILITIES

Direct Cost

Operating Cost $2,008,437 $321,728 $0 $254,293 $365,116 $75,130 $20,119,211 $23,143,915 

Maintenance Shop $123,565 $7,165 $0 $9,728 $30,380 $26,397 $113,841 $311,076 

Transportation Cost $0 $48,891 $41,567 $99,097 $92,382 $4,600,949 $4,882,886

Subtotal $2,132,002 $377,784 $41,567 $363,118 $487,878 $101,527 $24,834,001 $28,337,877 

Indirect Cost

Transportation $0 $29,657 $25,214 $60,111 $56,040 $0 $2,790,891 $2,961,913

Environmental

Management $6,350 $550 $250 $200 $640 $625 $867,155 $875,770

Maintenance Shop $149,826 $8,180 $0 $11,106 $34,684 $21,385 $129,974 $355,155

Administrative Cost $359,417 $14,785 $14,285 $38,557 $61,088 $39,935 $1,474,787 $2,002,854

Debt Service $765,284 $94,755 $205,591 $2,892 $249,812 $42,383 $17,714,395 $19,075,112

Subtotal $1,280,877 $147,928 $245,341 $112,867 $402,265 $104,328 $22,977,202 $25,270,808 

Total 

(Direct and Indirect) $3,412,879 $525,712 $286,908 $475,985 $890,143 $205,855 $47,811,203 $53,608,685

41

Curbside

Recycling

Collection

Tire Shredder

Contractor

Ferrous Metals

System

Compost

Facility

Yard Waste

Facility

Other

Recycling 

Collection

Total From

Previous Table

Grand Total

Full Costs
INTRODUCTION

FCA practices emerged over time in San

Diego Environmental Services Department

(ESD) as part of the city's routine budgeting and

planning activities. Today, FCA principles are

reflected in many of ESD's business practices.

For example, ESD's use of lease/purchase

arrangements allows the city to recover the cost

of vehicles over their useful life, and to minimize cash accounting (i.e., recognizing the full

vehicle cost at the time of purchase). ESD also

uses FCA when analyzing solid waste services

provided by city employees and its contractors.

To ensure that its services are compared on an

"apples-to-apples" basis, ESD uses FCA to identify all of the costs associated with providing

solid waste services. Such comparisons provide

a credible, publicly defensible basis for ESD's

choices between contracting for services and

providing them itself. 

ESD also uses FCA as a framework to analyze

issues of particular importance. When considering whether to implement an automated trash

collection system, for example, ESD used FCA

to determine the cost savings it could achieve as

a result. The findings of this analysis provided

the impetus the department needed to make the

switch from manual collection. 

BACKGROUND

The city of San Diego, located in southern

California, has the sixth largest population in

the country. In the 1990s, the city grew about 1

percent annually. The city's demographic characteristics are summarized in the text box at

right.

ESD provides refuse collection and disposal

services to all single-family residences, and to

some small businesses and multifamily residences. Curbside recycling and yard waste collection services are provided to a portion of the

city's residents. Drop-off household hazardous

waste collection events and recycling opportunities are provided for all residents. ESD also

operates a landfill and a mulching site (see

Table 14 on page 48 for details on ESD services

and facilities). Although ESD uses contractors to

provide some of its services, the two core waste

management activities—residential trash collection and landfill operation—are both performed

by the department. ESD has a staff of 471

employees, with the majority employed in field

or operational positions.

ESD's total FY 1998 budget is approximately

$71.1 million. This includes $7.9 million for

capital improvements, and approximately $63.2

million for operating expenses and equipment.

Refuse collection is by far the largest budget category, accounting for a total of $33.1 million out

of the total of $71.1 million, or about 47 percent. 

ESD is funded by the Refuse Disposal

Enterprise Fund, which receives revenues primarily from landfill tip fees, the city's General

Fund, and other smaller sources of revenue (i.e.,

fund balance). Figure 6 on page 43 provides a

breakdown of sources of revenue for the ESD. 

42

7.City of San Diego, California

Environmental Services Department

+

%

$

–

Demographic Characteristics

City of San Diego, California

Population (1990) 1,110,549

Area (square miles) 331

Density (persons per square mile) 3,355

Households 406,096

Household Income (1989 $) $33,686

Housing in 1- to 4-unit structures 65%
FCA IN SAN DIEGO

For San Diego, FCA does not have a fixed

scope or focus. ESD uses FCA on an "as-needed"

basis in studies of issues of particular importance. ESD has a process for conducting these

studies, using a combination of information

reported from the Financial Management

Department's Budget System, the AMRIS software system (see text box at right), and other

data it processes manually to complete its

analyses of the issue in question. The analysis

of automated collection presented in the next

section illustrates this process.

The FCA principle of accounting for costs

rather than outlays is reflected in certain ESD

accrual basis business practices, such as the

department's use of lease-purchase agreements to

match cost recovery as closely as possible to

equipment lifetimes. When a significant number

of additional vehicles are required, or vehicle purchase expense is significant, the city often uses a

lease/purchase arrangement for acquisition. For

43

AMRIS Job Order System

AMRIS (the Accounting and Management

Resource Information System), administered by

the Auditor and Comptroller, is the city of San

Diego's overall financial accounting system. The

AMRIS software package can allocate appropriate fringe benefits and proportions of supplies,

services, mileage, equipment, rental, energy/utilities, and overhead to a specific user-defined

activity, through what is referred to as a “job

order.” Job orders allow ESD to flexibly define

cost centers and to analyze them. ESD uses the

job order system to help identify the full costs of

services provided by ESD, and to determine fixed

fees and charges to recover these costs where

appropriate. For example, job order information

is used to charge other city departments for services provided by the Environmental Services

Department.

FIGURE 6: ESD SOURCES OF REVENUE (FY 1998) 

(REVENUE REQUIREMENT = $71.1 MILLION)

OTHER REVENUE 11.3%

DISPOSAL FEES 51.4%

GENERAL FUND 37.3%
other motor vehicles, the city sets up a reserve

or sinking fund. These funds are designed to

accumulate the cost of replacement equipment

(if applicable) over a predetermined number of

years. In this way ESD spreads the cost of the

equipment over its useful life, and has money

available to pay for replacements. While cash

accounting for vehicle purchases (i.e., recognizing the full vehicle cost at the time of purchase)

cannot be completely avoided, these two procedures minimize its use.

FCA IN ACTION: AUTOMATED REFUSE

COLLECTION

The city of San Diego has provided municipal refuse collection services to single family

residences, small multifamily residences and

small businesses since 1919 when voters initiated and approved a "People's Ordinance" which

mandated this service at no additional fee to citizens. Because of the risky and physically challenging nature of the work, the risk of injury to

the collection workforce has always been a

major concern. To address this concern, in

1989, an initial study was conducted to evaluate the feasibility of implementing an automated refuse collection system. The initial study

showed significant savings due to reduced

equipment and staffing needs as well as

decreased injuries and accidents. The initial

study recommended a pilot program to collect

data on the feasibility and cost-effectiveness of

an automated refuse collection system. The

pilot began in 1992 with 1,400 homes. It was

expanded to include an additional 700 homes

in 1993. Results from the pilot confirmed that

automation increases staff productivity and

decreases injuries.

Initially, a primary obstacle to automation

was the cost. Automated collection would

require more expensive trucks and specialized

containers. Since the city cannot charge citizens

for trash collection, the entire cost of the conversion would have to come from the city's General

Fund. To make things worse, the recession was

beginning to seriously affect city revenues. As a

result, the city began to investigate the potential

for lease/purchase arrangements. An FCA-based

study was designed to determine if a reduced

workforce together with reduced injury-related

costs would offset the additional costs associated with leasing automated equipment.

The study began by identifying the scope for

automated collection in San Diego. Automated

collection would not be practical for the highdensity, narrow streets along the beach (Mission

Beach) and hard-to-collect areas on steep hills

or dead-end streets. Apart from these areas, 95

percent of all city refuse stops could be collected using the automated process. Next, to maximize the efficiency of automated collection,

equipment had to be fully utilized. Under the

manual system, once an assigned route was collected the work day was considered complete.

With automated collection, crews were not limited by fatigue and so could work a full 8 hours.

Based on these assumptions, the costs and

staffing requirements for each collection option

were analyzed.

Key results from the study are shown in the

text box on page 45. With automated collection,

by 1999 the fleet would be 102 rather than the

126 vehicles, reducing the number of drivers

44

AUTOMATED REFUSE COLLECTION

Automated refuse collection involves a sanitation truck driver manipulating a hydraulically

powered arm to pick up containers specifically

designed to be used in the automated collection

process. While remaining in the cab, the driver is

able to lift the container, empty it into the truck,

place the container back on the ground, and

then drive to the next stop to repeat the process.

Automated collection eliminates the need for

sanitation workers to lift refuse cans.

Residents receiving automated collection services are provided with a single container constructed of a durable polyethylene material.

These containers have wheels for ease of movement and attached lids that help prevent odor

and restrict litter problems. The normal life span

of these containers is 10 years. The standard

container has a 96-gallon capacity, equal to

three standard trash cans. Residents requiring a

smaller container can select optional 64- or 32-

gallon containers.
and supervisors by 71. Over the 1994-2004 period, the city could save about $22.6 million;

approximately $18.8 million from reduced budget expenditures, plus an additional $3.8 million from reduced "light duty" costs, a hidden

cost of the manual operation incurred when

injured workers need to be reassigned less

strenuous work loads.

Use of FCA entered into the refined study in

a number of ways related primarily to indirect

and overhead costs:

■ Reductions in staff levels reduced both

wages and benefits, each of which contribute

substantially to labor costs.

■ Use of automated collection led to reduced

requirements for "light duty" for injured

workers, which typically involves less efficient use of personnel.

■ Use of automation reduced the risk of serious

injury, and the associated cost of risk management (e.g., insurance, workers' compensation, etc.).

The last two points, which would be exceedingly difficult to quantify without a thorough

FCA approach, contributed a total of about $8.3

million out of total savings of $22.6 million. 

The results of this study were published in

the City Manager's report of November 2, 1993.

San Diego's decision to automate collection was

based largely on these results. Since the adoption of automated collection, ESD has used FCA

to analyze the automation of yard trimmings

and recycling collection. ESD is currently considering an arrangement in which the same

truck would be used to collect yard trimmings,

co-mingled recyclables, and trash on a bi-weekly schedule. As in the study of automated trash

collection, FCA allowed ESD to account fully

for all the costs and benefits of the innovative

collection system under consideration.

LESSONS LEARNED

San Diego has long used FCA to address

planning and performance issues related to the

solid waste services it offers. Based on its experience with FCA, San Diego has learned a number of useful lessons:

■ Developing appropriate accounting systems

can foster the application of FCA.

Development of AMRIS and its job order system has facilitated ESD's use of FCA. 

■ Careful accounting of indirect and overhead

costs can substantially affect the comparative

economics of solid waste management

options. Including reduced light duty costs

as well as savings on risk management costs

had a substantial impact on San Diego's

assessment of automated refuse collection.

■ FCA can help solid waste management agencies function in an increasingly competitive

solid waste industry. In principle, private

companies could supply collection and disposal services of the type provided by ESD.

To remain competitive, ESD's services must

45

Comparison of Manual and Automated Collection for San Diego

Cumulative Impact: 1994-2004 Manual Automated

Collection Costs:

Hard-to-Collect $59,582,177 $58,118,335

Rest of City $122,886,781 $89,046,394

Subtotal $182,468,958 $147,164,729

Light Duty Over Budget $5,011,258 $1,144,466

Container Lease Costs -0- $21,036,000

Total Expenditures $187,480,216 $169,345,195

Risk Management Savings -0- -$4,398,650

Grand Total $187,480,216 $164,946,545

Annual Level $17,052,747 $14,999,686
be cost-effective. ESD uses FCA to ensure

that the costs of its services are compared to

others' on an "apples-to-apples" basis. 

■ Application of FCA is dependent on the type

of project being considered. FCA is not

appropriate for every routine planning and

operational decision that solid waste management agencies face. When major decisions

arise, however, or when a need emerges for a

"big picture" understanding of future opportunities and challenges, FCA can be an

essential tool.

Contact: 

Yvonne Williams

Environmental Services Department

9601 Ridgehaven Court, Suite 210

San Diego, CA 92123-1636

Phone: 619 492-5076

46
TABLE 14: SUMMARY OF SERVICES AND FACILITIES IN SAN DIEGO

47

Solid Waste

Services and

Facilities

Source Reduction/

RecyclingOutreach

Drop-Off Recycling

Curbside Recycling

Yard Trimmings

Collection

HHW

Bulky Item

Collection

Residential Trash

Collection

Service

Provider

A=Agency

C=Contract

A and C

A and C

A and C

A

A and C

A and C

A

Tonnage

Managed

N/A

1,000

24,000

N/A

200

N/A

314,000

Comments 

ESD promotes residential waste minimization through

several initiatives, including a home composting program and contracted public education programs. It

also provides technical assistance to city departments, businesses, apartment complexes, and local

military bases.

ESD funds drop-off recycling through 48 park and

recreation centers throughout the city. The drop-offs

are unstaffed, and both ESD and contractors provide

collection. Revenue gained from the sale of materials

is returned to the park and recreation centers. ESD

also contracts out operation of the Miramar Buy Back

Center.

Recyclables are collected weekly from roughly

82,000 single family households. ESD provides collection for approximately half of them, while a private

company is contracted with to collect material from

the other half. Material is taken to private processing

centers.

Yard trimmings are collected weekly from roughly

150,000 households. Material is taken to the

Greenery at the Miramar Landfill to be mulched.

Eight HHW collection events are held annually, the

operations of which are contracted to a private company. Residents can also bring used oil, antifreeze,

batteries, and oil filters to city-run recycling events

held throughout the year. ESD also has a "graffiti

exchange bank" to use paint collected to cover over

graffiti in the city.

Twenty-four community cleanups are conducted

annually. Residents can dispose of bulky items at this

event. ESD also has a contract with a private organization that requires it to hold 35 cleanups. The

Miramar Buy Back Center also accepts some bulky

items.

The city provides weekly collection from 293,000 

1- to 5-household structures located on public rightof-ways. Gated communities (on private streets) are

excluded, as well as some multifamily units electing

to use their own collection service. The vast majority

of refuse is brought to Miramar Landfill, although

about 8,000 tons per year go to other landfills to

increase route efficiency.

<continued>
48

TABLE 14: SUMMARY OF SERVICES AND FACILITIES IN SAN DIEGO 

(CONTINUED)

Solid Waste

Services and

Facilities

Government

Recycling

Commercial Trash

Collection

Other SWM Services

Mulching Facilities

Landfill

Miscellaneous

Services

Service

Provider

A=Agency

C=Contract

C

A

A

A

A

A

Tonnage

Managed

222

N/A

N/A

84,000

1,400,000

N/A

Comments 

More than 106 city offices participate in a paper and

container recycling program that is operated by a

contractor (currently at no charge to the city).

ESD collects from approximately 7,000 small businesses. The tonnage handled from this program is

included in the figure noted for Residential

Collection.

These services include abatement of illegal dumping,

litter, and undesired vegetation from public properties; public receptacle collection; dead animal collection; and enforcement of the solid waste provisions of

the Municipal Code.

The "Greenery" mulching facility handles yard trimmings from the curbside program as well as drop-off

materials from residents and local landscapers. In

addition, ESD has an annual Christmas tree recycling

initiative, which encourages residents to drop off their

trees at one of more than two dozen locations

around the city.

The city operates the Miramar Landfill, which is situated on Navy property and owned by the Navy. As

part of the lease agreement, the Navy pays no tip fee

for the waste it disposes of. The landfill handles most

(86 percent) of the city's waste and some waste from

outside the city.

ESD runs several programs for other city facilities.

They include lead, asbestos, and hazardous materials

technical support and management, and underground storage tank management.
Accrual basis accounting focuses on identifying

the cost (dollar value) of resources as they

are used. In order to match costs to resource

use, accrual accounting spreads costs over

the useful life of a resource using depreciation and/or amortization techniques. 

Amortization is a method of determining the

annual costs associated with obligations for

future outlays. Landfill closure and postclosure costs, for example, are often amortized

over the operating life of the landfill. 

Back-end costs include expenditures to properly wrap-up operations and take proper care

of landfills and other municipal solid waste

facilities at the end of their useful lives; the

costs of post-employment health and retirement benefits for municipal solid waste

workers also fall in this category.

Capital outlay means an outlay of cash to

acquire a resource that will be used in MSW

operations over more than 1 year. If a community pays $500,000 for a collection fleet in

a given year, for example, this would represent a capital outlay. Capital outlays (past,

present, and future) must be converted into

annual costs for full cost accounting purposes.

Capital replacement funds are established to

ensure that sufficient cash reserves are available to replace long-term capital equipment. 

Cash flow accounting, also known as cash basis

accounting or general fund accounting, is a

system where cash outlays are recorded as

they are actually paid out for goods and services.

Cost means the dollar value of resources used

for municipal solid waste management.

Techniques such as depreciation are often

used to convert capital outlays into annual

costs. Assume that an outlay of $500,000 is

made for a collection fleet that is in use for 7

years, for example. Using straight-line depreciation, accrual accounting systems would

assign an annual cost for the fleet of about

$71,429 over the life of the collection fleet.

Cost center is any solid waste management

activity that receives separate attention

through an account or group of accounts.

Debt service costs are annual expenses incurred

to pay back interest and principle on a loan. 

Depreciation is a method of allocating the costs

of capital outlays over the useful life of the

resource, which is the period of time during

which the resource is expected to provide

services.

Direct costs are costs that are clearly and exclusively associated with solid waste management.

Enterprise funds are financial mechanisms used

by local governments to finance and operate

a given activity like a private business.

Agencies that use enterprise funds usually

must collect sufficient revenues to cover the

full cost of agency operations and services

provided. 

Fixed costs include interest, depreciation, and

amortization for past or future landfill capital

outlays and other costs (e.g., security) that

cannot be reduced quickly in response to

lower waste tonnage.

Flow controls are legal authorities used by state

and local governments that require that

waste from a defined geographic area be

delivered to a specific processing, treatment,

or disposal facility.

49

8.Full Cost Accounting

Glossary

%

+ $

–
Full cost accounting is a systematic approach

for identifying, summing, and reporting the

actual costs of solid waste management, taking into account past and future outlays,

oversight and support service (overhead)

costs, and operating costs.

Future outlay means an expenditure of cash in

the future that is obligated by current or

prior activities.

General fund accounting — see cash flow

accounting.

Hidden costs are the dollar value of activities or

resources that appear to be free (i.e., no cash

outlay is made. For example, many small

towns have been deeded their landfills by

former owners. Reqardless of how it was

acquired, the landfill (asset) still has value,

which is consumed over time with use.

Thus, there is a cost even where there has

been no outlay.

Indirect costs are costs that are not exclusively

related to solid waste management but that

relate to more than one local government

activity. Such indirect costs for solid waste

management (and other local government

activities) can include accounting and payroll, personnel, legal, purchasing, data processing, records management, and executive

oversight (e.g., the mayor's salary and office

expenses).

Integrated solid waste management incorporates several different approaches for handling the entire municipal solid waste

stream. Using a combination of approaches

allows each type of waste to be managed

according to environmental and economic

considerations, with priority going to source

reduction, reuse, and recycling, while reserving landfills as the least desirable waste management method. See also waste management

hierarchy.

Net cost per household indicates the amount of

service fees and assessments that must be

collected on average from each household to

pay for the full costs of solid waste management, after taking into account any byproduct revenues. The net cost per household

equals the net costs per year divided by total

households served.

Net cost per ton is the best common denominator for comparing the current costs of solid

waste management activities within or across

local government jurisdictions.

Operating costs are regularly recurring costs of

resources that are used over a relatively short

period of time (i.e., less than 1 year) in order

to support ongoing municipal solid waste

operations.

50
Outlay is an expenditure of cash. See capital

outlay for more details.

Overhead costs are the management and support costs of running a solid waste program.

Overhead costs might include legal services,

administration, data processing, billing, and

purchasing. 

Routine cash outlays for solid waste management activities are the same as the operating

costs of those activities.

Service revenues are derived from fees charged

for the amount of municipal solid waste services used, such as unit pricing for solid

waste collection and tipping fees for waste

disposal.

Unit pricing charges solid waste generators

(e.g., primarily households) based on how

much they throw away. Also called variable

rate pricing and pay as you throw.

Up-front costs reflect the initial investments

and expenses necessary to start a municipal

solid waste activity. Up-front costs could

include permitting, education, and initial

capital outlays for capital equipment and

facilities.

Variable costs are regularly recurring operating

expenditures for MSW operations that can be

reduced quickly in response to changes in

service levels. 

Waste management hierarchy emphasizes a

preferred order of management approaches:

source reduction (including reuse), recycling

(including composting), and waste combustion with energy recovery and landfilling. 

51
For More

Information on the

Case Studies

BROWARD COUNTY, FLORIDA

Tom Henderson, Director

Broward County Office of

Integrated Waste Management

201 South Andrews Avenue

Ft. Lauderdale, FL 33301

Phone: 954 765-4208

E-mail: thenderson@co.broward.fl.us

COLUMBIA, MISSOURI

Lowell Patterson, P.E., Director

Public Works Department

P.O. Box N

Columbia, MO 65205

Phone: 573 874-7250

E-mail: lpatters@mail.coin.missouri.edu

GLENDALE, ARIZONA

Mike Hoyt, Director

Field Operations Department

6210 West Myrtle Avenue, Suite 111

Glendale, AZ 85301

Phone: 602 930-2602

E-mail: hoyt@ci.glendale.az.us

INDIANAPOLIS, INDIANA

Charles Bardonner, Director

Stephanie Stevenson, Finance Manager

Solid Waste Management Division

2700 South Belmont Avenue

Indianapolis, IN 46221

Phone: 317 327-5684

E-mail: sstevens@indygov.org

SOUTHEAST PUBLIC SERVICE 

AUTHORITY, VIRGINIA

John Hadfield, Executive Director

Southeastern Public Service Authority

P.O. Box 1346

Chesapeake, VA 23327-1346

Phone: 757 420-4700

SAN DIEGO, CALIFORNIA

Yvonne Williams

Environmental Services Department

9601 Ridgehaven Court, Suite 210

San Diego, CA 92123-1636

Phone: 619 492-5076

For More

Information on Full

Cost Accounting

EPA published several other documents

about FCA for solid waste managers. Free

copies of the following documents are available

from the RCRA Hotline. To order, call 

800 424-9346 or TDD 800 553-7672. In the

Washington, DC, area, call 703 412-9810 or 

TDD 703 412-3323. 

■ Full Cost Accounting for Municipal Solid

Waste: A Handbook (EPA530-R-95-041). This

document describes the key concepts and

benefits of FCA. It explains many of the

financial terms used in FCA and the specific

costs that are considered. While the handbook is not a step-by-step “how-to” document, it does describe the steps involved

with implementing FCA for solid waste management. It is a comprehensive overview and

a valuable resource for local governments.

■ Making Solid (Waste) Decisions With Full

Cost Accounting (EPA530-K-96-001). This

document is a short primer that explains the

basic concepts of FCA. It provides a summary of the benefits, challenges, and uses of

FCA, as well as five short case examples

about agencies that have used FCA successfully.

■ Questions and Answers About Full Cost

Accounting (EPA530-F-98-003). This 15-page

booklet features some of the questions and

answers discussed during the 1996 nationwide, interactive satellite forum on FCA,

"Planning, Pricing, and Performance: The

Business of Solid Waste Management." The

forum featured a panel of four local government solid waste managers and one policy

analyst who spoke about their experiences

using FCA. 

In addition, check EPA's Web site for more

FCA information: <www.epa.gov/fullcost>.