Palo Alto's waste-collection service is, in some ways, a victim of its own success.
The city's effort to discourage old-fashioned trash and encourage recycling and composting seems to be going well, almost too well, with more commercial customers trimming their loads of landfill-bound garbage.
But less garbage collection also means less revenue for the city's Refuse Fund, which in turns means that city residents and businesses may soon have to pay higher rates to get their trash picked up.
The City Council Finance Committee members struggled with this irony Tuesday night as they brainstormed ways to close a $6.7 million deficit in the Refuse Fund, a budget hole the committee learned about in May. They took no action and are scheduled to resume discussion of the Refuse Fund on July 20.
The gap could be partially attributed to the success of the city's Zero Waste program, which promotes recycling and composting and gives residents incentives to throw away less trash. The program, which the council instituted in 2004, has helped Palo Alto increase the percentage of local waste diverted from landfills by about 15 percent, to about 78 percent.
But under the existing rate structure the program is also hurting the city's bottom line. As residents scrap their 32-gallon trash cart for 20-gallon "mini-cans" and in the process slash their monthly rates from $31 to $15, the city's revenues plummet.
Recycling, meanwhile, is free.
The committee on Tuesday considered what Councilman Larry Klein called "an interesting collection of bad alternatives" for closing the projected budget gap, including charging more for landfill use; closing the city's compost and recycling facilities earlier than planned (a move that would send the city's trimmings and recyclables to the SMaRT Station in Sunnyvale); and shifting street sweeping from weekly to biweekly.
Staff also proposed raising refuse rates by 6 percent for residential customers and by 9 percent for commercial customers.
Committee members said they were reluctant to raise rates and asked the department for a broader menu of possible cuts. They requested more information about proposed alternatives and a larger menu of expense reductions in the Public Works Department.
Solid Waste Manager Rene Eyerly said Tuesday the model staff used to project refuse revenues was "outdated" and "simplistic." Staff has been working with a consultant since last fall to devise a more sophisticated and accurate forecasting model, which is now being finalized, she said.
Councilman Greg Scharff called the city's rate structure "completely unsustainable" and said he would rather see the city's landfill-diversion rate remain at 78 percent than go up to 90 percent and, in the process, hurt the city's quality of life.
"I think our model is completely unsustainable -- it's crashing and burning," Scharff said. "Zero Waste is equaling zero dollars and that's the problem."
In her report, Eyerly attributed the shortfall in the Refuse Fund to three main factors: a reduction in customer sales caused by the ongoing recession; a "larger than anticipated success of the Zero Waste Program," and city policies that include more capital spending and a ban on commercial waste at the city's landfill near the Baylands.
The landfill, which is more than 98 percent full, is scheduled to close between 2012 and 2014, based on volume in the landfill and when the dump is deemed full. Palo Alto is required by its state landfill-operations permit to keep more than $6 million in reserves to close the landfill.
The revenue shortfall is threatening to bring the reserve down to almost zero, which would put the city in direct violation of its contract, Public Works Director Glenn Roberts said. The city needs to eliminate this budget gap as soon as possible (possibly through a rate increase) and then revisit rates again next year, when the new forecasting model is in place, Roberts said.
"We absolutely have to take some initiative now to deal with this either through rate increase or expense reductions, knowing full well that we'll be going through a study and coming back a year from now with some major changes in this regard," he said.
Klein said he was bothered by the idea of changing the rate structure for two years in a row -- following a 17 percent increase in June 2009 -- and suggested deferring on rate changes for a few more months, when more data and a better forecasting model are available.
Scharff said the city should consider eliminating positions and requested a larger list of possible cuts.
He also said he opposes reducing the level of street sweeping, a service reduction that could increase water pollution in the baylands and at local creeks.
"I'm troubled by the fact that we're substituting one environmental good for another," Scharff said. "What we're saying is Zero Waste takes precedence to protecting the bay.