“Betty, we can’t propose close to a 50 percent increase in our monthly trash col
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“Betty, we can’t propose close to a 50 percent increase in our monthly trash collection charges! It would be political suicide. I don’t have to remind you that if I lose November’s election we’ll both be looking for new jobs.” Mayor John South of the city of Canbury was meeting with the city’s Director of Finance, Betty Brady, to prepare for the upcoming budget hearing. Betty responded; “ John, we’re really caught here. You know we have to cleanup the old Platt Road Landfill. Our planned bond issue will provide the short-term cash flow for the cleanup, but trash collection fees must pay off the bonds. The Waste Management Fund cannot make bond payments without this increased revenue and also comply with the City Council’s requirement to operate with revenues exceeding expenditures by 1.25 percent.” As John and Betty concluded their meeting, John was discouraged. He asked Betty to prepare a cost analysis of landfill operations, including cleanup costs for the Platt Road Landfill. The old Platt Road Landfill In April 2015 the EPA notified the city that the Platt Road Landfill, which had been closed since 2011, was being investigated as a possible hazardous waste site. Acting on complaints from citizens about odors and rodents, the EPA performed a preliminary Remedial Investigation and Feasibility Study of the old landfill site. As a result of the study, the EPA placed the site on its National Priorities List of the most serious hazardous waste sites. As the current owner of the property, the city of Canbury was designated as a potentially responsible party (PRP) under the Comprehensive Environmental Reclamation and Cleanup Liability Act, commonly referred to as the Superfund. The EPA study found that the waste at the site contained volatile organic compounds (VOCs) that represented significant danger of explosion. As a short-term safety measure, the EPA had fenced the landfill and posted warning signs. The EPA was seeking reimbursement of $2.2 million from the city for the cost of conduction the preliminary site investigation and installing the fencing. The cleanup approach recommended by the EPA was to pump the contaminated groundwater and treat it by air stripping. This technique forces contaminated water through a pressurized air stream inside a tower filled with filtration material. In this process, the contaminants are transferred to the air stream that is then collected and treated. Air stripping is a proven technology, and can remove approximately 95 percent of the contaminants from the groundwater. The cost estimate for the air stripping process is $28 million. Following the groundwater treatment, a clay cap would be constructed to prevent rainwater from leaching hazardous materials into the groundwater. A multilayer design had been proposed which would include a water-resistant layer two feet thick and a one-foot thick drainage layer. Finally, the cap would be covered with topsoil and vegetation. A contractor had submitted a bid of $5.4 million for the job. Betty had estimated that ongoing maintenance of the cap could be done by the city’s Public Works Department at a cost of $240,000 per year. A bond issue was intended to fund the one time cost of cleaning up the landfill. However, the annual maintenance cost would have to be met from annual revenues. The city is obligated to pay 8% interest on these bonds and must set aside 2.7% of the total bond principal in a sinking fund that is expected to earn 5% return for the replacement of this principal. Betty began her analysis by reviewing contracts the city had signed for work at the Platt site. These included 2 groundwater monitoring wells, constructed at $75,000 each, and an extension of the municipal water system at a cost of $720,000, to replace drinking water wells used by residents near the site. The city also paid $85,000 in outside attorney fees related to the negotiations and litigation with other potential PRP’s. Betty knew that in addition to the city attorney’s office had spent an estimated 600 hours on the case, which was costed at the rate of $150 per hour. The Assistant Director of Public Works also spent over 100 hours providing information to both attorneys’ offices. His time is charged at $35 per hour. Current trash collection charges and costs The city currently serves 29,270 households and 2,150 businesses. Residential customers are currently charged $12 per month and businesses $28 per month for trash services. The current operating costs for trash collection and landfill operations is $4,810,000. This does not include the one-time clean up cost or the additional maintenance costs for the landfill. The one-time clean up cost, paid by the bond issue, requires an annual transfer to a debt service fund for the principal and interest on these bonds. The bonds carry an annual interest rate of 8 percent paid semiannually. The entire principal is due in 20 years.
Required: 1. Schedule of Clean-up Cost
Explanation / Answer
Schedule of clean up cost
Particulars Amount ($ mils) EPA - Site investigation and fencing 2.2 Air stripping 28 Design 5.4 Maintenance 0.24Related Questions
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