COLLECTION: How Much Do You Know About Pay-As-You-Throw?

Jan Canturbury

In the past, efficiency, cost effectiveness and solvency haven't always been key characteristics of municipal solid waste (MSW) programs.

But times have changed. In this age of tight budgets, government services are being held to a new standard of fiscal solvency. Additionally, more communities are looking at pay-as-you-throw (PAYT) programs to increase their recycling rates and to make their solid waste management programs economically and environmentally sustainable. More than 4,000 communities have employed PAYT programs, according to the Washington, D.C.-based U.S. Environmental Protection Agency (EPA).

Under PAYT, households have an economic incentive to reduce waste because they pay based on the amount of trash they set out each week instead of a flat rate. According to EPA research, overall waste disposal in PAYT communities declines an average of 14 percent to 27 percent. In addition, recycling rates often increase dramatically, sometimes doubling or tripling what they had been before the PAYT program began. PAYT has helped many communities keep MSW costs down because when less waste is created, waste collection and disposal costs are reduced.

Key to making PAYT work is choosing the correct price per can or bag of trash. An effective rate not only provides an economic incentive to reduce waste without causing community dissent, but also ensures that MSW costs are covered.

To help PAYT communities calculate that all-important rate, the EPA created "Rate Structure Design: Setting Rates for a Pay-As-You-Throw Program." This brochure takes the guesswork out of the challenging process of setting rates for a PAYT program.

RSD and Comparable Communities. The first section of the brochure discusses the importance of goal setting and how it helps to determine a program's pricing system, container type, billing system and public education technique. It also outlines the general steps involved in Rate Structure Design (RSD), the process a community can use to determine the price per unit of MSW set out for collection. The three types of PAYT pricing systems are proportional, variable and two-tiered.

The brochure's second section discusses another method of setting PAYT rates - drawing from comparable communities. Some communities start the RSD process by examining successful PAYT cities or towns, particularly those with similar demographic profiles. A map in the brochure illustrates sample PAYT rate structures nationwide.

The Six-Step Process. The simplest initial approach to RSD may be using the rates of comparable communities. However, a community eventually might need to revise its rates to more reliably cover costs, more effectively encourage waste reduction or more vigorously achieve community goals.

Section III of the brochure explains how solid waste managers can accomplish this using a six-step RSD process and community data. The six steps are:

* Forecasting residential MSW amounts;

* Determining the types of MSW services to provide;

* Estimating net costs of MSW;

* Determining PAYT revenues and MSW program cost coverage;

* Calculating PAYT rates; and

* Adjusting MSW services and PAYT rate structure.

To clarify each step, the brochure provides step-by-step sample calculations based on the hypothetical community of "Midtown," a midsize PAYT community with a population of 35,000. Examples walk you through Midtown's process of calculating MSW tonnages and net costs, choosing a container size, projecting program revenues and, ultimately, calculating a rate structure. To illustrate the differences between the three pricing systems, the brochure explains how Midtown calculated proportional, variable and two-tiered PAYT rates.

Success Stories. The final section of the brochure features real-world examples of small-to-large-sized communities that have a distinct rate structure to serve as models for various community types.

For example, Oconee County, Ga., used the comparable communities method to set its PAYT rate. With a population of 25,000, Oconee compared its program to a PAYT community with a similar service level and demographic profile before choosing a proportional system that set its fee at $1.50 per bag.

Wilmington, N.C., which has 62,000 residents, used the six-step process. Using a form of full-cost accounting to identify all of its costs before establishing a rate structure, the city's goal was to establish an equitable system that rewards residents that generate less trash. Consequently, the city offers a range of options in its PAYT program. By making trash rates more equitable, the city also increased recycling.

"Rate Structure Design: Setting Rates for a Pay-As-You-Throw Program" is a valuable tool for any community starting or refining a PAYT program. For a free copy of the brochure, call the PAYT Helpline toll-free at (800) EPA-PAYT or order it online at www.epa.gov/payt

Choosing the correct price per can or bag of trash in a pay-as-you-throw (PAYT) program is crucial to success. To help determine what price per unit of MSW to set, the U.S. EPA has outlined the three steps to Rate Structure Design (RSD).

* Establish community MSW goals. Clear goals can help determine the approach to the RSD process; pricing system, container types, and billing system; public education techniques and other key aspects of the PAYT program.

* The next step is to choose a pricing system, either proportional, variable or two-tiered.

* Establish the rates. Rates now can be set using either the six-step process or the comparable communities method.