Public Comment

Berkeley’s Deficit Devil and the Details

By Dan Knapp
Thursday February 18, 2010 - 09:01:00 AM

The trouble with reporting what another newspaper says is that when that newspaper gets it wrong, the secondhand “news” purveyor gets it wrong too. The San Francisco Chronicle’s story on Feb. 9 got it wrong about the likely causes of Berkeley’s budget deficit. On Feb. 10, East Bay Express columnist Robert Gammon copied, simplified, and amplified the error.   

The sensational “news” appeared to be that Berkeley’s budget deficit is largely caused by recycling’s success. That would be a big irony if it were true, but it isn’t. The real causes are buried in an accounting report that mixed wasting and recycling expenses together. The interpreters inaccurately blamed recycling. A closer look reveals that income targets from rate hikes were missed by a wide margin, and wasting is responsible for most of the cost increases.   

On Jan. 25, a senior city budget analyst flanked by Public Works officials told the Berkeley Zero Waste Commission in some detail why the city’s Refuse Fund had gone into deficit mode. It was a complicated story. About 20 people attended, but no reporters. Ten pages of printed PowerPoint slides were handed out. Neither the Chronicle nor the Express reporters seem to have had access to this document, even though the Chronicle reporter based most of his story on what a Deputy Director of Public Works told him.   

The budget analyst’s numbers say only about 40 percent of the city’s total deficit can be blamed on Refuse Fund losses. The other 60 percent comes from other city activities. The headline and the slant of the Chronicle story, however, made it seem as if recycling was to blame for just about all of it.   

Of that $3.86 million loss (not $4 million) in the Refuse Fund, the biggest loser wasn’t recycling at all. It was the city’s transfer station, at a loss of $1.42 million—37 percent of the Fund’s loss. One cause of the facility’s falling revenues may have been the city’s 2008 rate increase to $126 per ton for dumping mixed rubbish loads. One slide in the packet said that the city had projected the rate hike would increase revenue by $1.35 million. Instead the actual revenue declined by $70,000. That’s a pretty big missed target, equal to about 36 percent of the Refuse Fund deficit all by itself.   

Trash haulers are very sensitive to increases like these because they have to pay cash for dumping. The missing haulers may have gone elsewhere. There are competing transfer stations, and there is a growing and vibrant collection of materials recovery enterprises too, including the business I run. A few may be dumping in a ditch somewhere, but it’s very risky to do that.   

Berkeley’s Public Works Department cites a decline in construction as their best guess as to why transfer station revenues are dropping. But my company is just one in a cluster of West Berkeley building materials suppliers, all of whom seem to be booming just now, based on vehicles in parking lots and improvements to facilities. My company is certainly receiving an increased supply of materials removed during remodels and other construction. There’s a lot of construction going on.   

The residential garbage collection system accounts for 35 percent of the refuse fund deficit, putting it in causal second place. Customers whose rates were hiked asked for smaller garbage bins, since they have learned to recycle more and the smaller bins cost less. In the accounting, recycling is “free,” meaning it is bundled into garbage fees and therefore invisible. But Public Works Director Claudette Ford told the Zero Waste Commissioners that customers wanting smaller refuse containers was only part of that loss, not all of it.   

The city-operated commercial garbage collection also finances free commercial recycling, but businesses can contract out for garbage collection and still get free recycling pickup. That would generate a loss.   


What Is Costing So Much?   

Another slide asks “What is costing so much?” Again, the actual numbers paint a very different picture from the Chron/Express view.   

The Refuse Fund absorbed over $9 million in cost increases since 2007. The biggest was “landfill and recycling contract increases.” This presentation generates confusion by mixing landfilling and recycling, which ought to be separated. Also, the city has perhaps a dozen or so recycling contracts going at any given time.  

Unfortunately, since these slides didn’t break out recycling contract increases in any detail, it’s impossible to know whether the losses are mostly (as I suspect) the three contracts for offsite construction and demolition processing that the city signed in 2008. These contracts have all gone sour. Two were simply abandoned; perhaps the third will be dropped when it runs its course. It just didn’t pay to long-haul mixed rubbish 75 miles to Stockton for processing. The one contract still in effect requires the City to provide a certain tonnage or pay a penalty.   

The second biggest cost increase was for “4 years of labor cost increases.” The report doesn’t mention how much of that was unplanned overtime costs incurred during some known garbage operations problems.   

The third biggest increase was for $2.1 million in “Increased landfill monitoring costs and repair.” That cost hike pays for past wasting, not current, and is equal to more than half the Refuse Fund deficit right there.   

Finally, two long-term recycling programs did get cost increases since FY 2007. But they are investments, too, and together they account for only 13 percent of the total. The first is the very popular weekly organics pickup run by the City, and the second is a new split-cart curbside recycling system run by Ecology Center that is expected, among other things, to reduce poaching by itinerant scavengers. The costs of expanding these two program are only $750,000 and $500,000, respectively.   

The city knew in early 2009 that it was heading into deficit land. Public Works’ primary response was to raise its disposal rates, by 20 percent for residential and commercial collections, and by 10 percent for the transfer station. In a slide that asks “What Have We Done So Far?,” the city reports that the intervention didn’t work very well. The combined rate increases were budgeted to raise $5.73 million, which would have put the Refuse Fund into the black again. But the targets were not met. Residential collection got only 50 percent of what it was supposed to get; commercial collection got about one-third; and the transfer station actually had a negative number to report, a loss of $70,000. The combined deficit expressed as a missed target is $3.6 million, or over 90 percent of the Refuse Fund deficit.   

On behalf of real recyclers everywhere I would like to thank the Chronicle and Express for covering these issues. By dint of hard work and sacrifice, the modern recycling movement has grown from modest beginnings into a vast network of materials recovery enterprises several times the financial size of the wasting industries. We have a high concentration of recovery businesses here. Berkeley’s deficit hole can be filled, but the system needs adjusting and redesign to take full advantage of the new realities and opportunities. Factual information is crucial. Thanks for the opportunity to contribute factual content.   


Daniel Knapp, Ph.D., is CEO of Urban Ore, Inc., a reuse and recycling materials recovery enterprise in Berkeley, California, since 1980.