Time has come ‘to put some money’ into landfill, but there’s no money available
For those who thought the city’s headaches ended on June 5 when the Sallisaw Municipal Authority voted to reject selling the municipal landfill or partnering with an outside entity, an extra big bottle of aspirin may be prudent.
For those who thought the city’s headaches ended on June 5 when the Sallisaw Municipal Authority voted to reject selling the municipal landfill or partnering with an outside entity, an extra big bottle of aspirin may be prudent.
Because, as City Manager Keith Skelton provided the SMA board a jarring reality check Monday, the city may be in for one doozy of a noggin throbber.
“The landfill’s at a place in time where it has served the city well,” Skelton told the board, “but it’s time we’ve got to put some money into it. And it’s money that’s not available and has not been available because we have not been able to increase our tonnage intake. So the key is increasing tonnage.”
But Skelton has yet to solve the tonnage dilemma.
And if consistent and significant tonnage can be secured, it’s a Catch 22 for the city. More tonnage is needed to make the landfill financially feasible, but more tonnage could mean a shorter lifespan for the landfill.
“I know there’s been some naysayers that say ‘if someone buys it, they’re gonna fill it up’,” Skelton said of the landfill. “Well, it’s gonna get filled up whether we own it or not. The tonnage is still gonna come.”
Or will need to come for the SMA to continue to operate the 1,200-acre landfill.
The city’s migraine began on May 1 when CARDS Holdings LLC tendered an unsolicited $21.5 million purchase offer. The ensuing scrutiny by the board combined with widespread public outcry lit the fuse to a powder keg of criticism — some directed at the SMA for even considering selling the 29-yearold landfill, some directed at CARDS for making the offer, some certain the purchase offer was undervaluing the landfill and some fearful the reported 80-year lifespan of the facility would be prematurely shortened with increased tonnage a new owner or operator would generate.
That raging firestorm of controversy was seemingly extinguished on May 7 when the board rejected the CARDS proposal — or any offer by other would-be suitors — and made the commitment to go it alone and remain in the landfill and sanitation collection business.
However, with that commitment come some hard choices and, as Skelton showed the board Monday, the need for higher landfill rates.
And probable residential rate increases.
“What I’m doing right now,” Skelton told the board, “I’m preparing a master fee schedule change for the July meeting to bring to you the changes to landfill tip fees, sanitation rates, water and sewer rates as well. Water and sewer rates have not been increased in a couple of years, so we do need to adjust those rates just to make up for inflation and so forth. If you remember, we adjusted residential water and sewer rates when we accepted the CDBG (Community Development Block Grant) for the landfill line. We had to modify our rate structure just a little bit.
“I’m trying to work my way through trying to determine what exactly the additional revenues will be for water and sewer rates. I will tell you, we can’t generate a whole lot of revenues on water and sewer rates on usages. Where you have to generate it is based on the minimum monthly payments for your minimum service requirements. So that’s really the only way, and even by increasing that, it’s not really a great amount of revenue generation additionally for water and sewer,” Skelton said.
In the event additional unbudgeted revenues are generated, “If we decide we need to use those revenues later in the year, we would come back and adjust our budgets accordingly to allow us to use those revenues. Hopefully I can make up the revenues elsewhere, at least that’s what I’m trying to do,” he said.
Pursuing tonnage
But foremost in Skelton’s pursuit of sustaining revenue is increased tonnage for the landfill. He presented the board with several rate scenarios outlining proposed landfill tipping fees and rates for sanitation services of $48, $52, $54 and $60 per ton.
“These rate scenarios are based on current tonnage intake,” he prefaced in his presentation to the board. “There is a possibility that additional tonnage can be obtained. I have been in contact with haulers out of the northwest Arkansas, northern Oklahoma area. I have one that was supposed to start hauling today (Monday), but they’ve delayed it to at least Wednesday. So we have a contract that’s ready for them to probably bring in excess of 150 tons per day at an agreed-upon rate which is quite a bit higher than our other agreements. So we’re just waiting on them to start hauling.”
But should increased tonnage begin, Skelton remains skeptical as to the long-term benefits.
“The tonnage, if I get any from northwest Arkansas, I’m not comfortable with it being a long-term solution right now. If anything, it’s a short-term solution based on what happens with their landfill at Tonitown. Yes, they have approval for it right now, but I don’t know what additional court battles they’re gonna go through,” he told the SMA. “If they started construction today, they could have a cell or two in a year, and all the tonnage I secured could go right back to Tonitown.
“We have revamped our tipping fee contract, which [city attorney] John Robert [Montgomery] has reviewed and approved. So we’re just waiting to use it. So I am trying to actively solicit other tonnage from other places.
“The contract I’m looking at right now with a company is a three-year agreement. It’s got a cancellation fee in it if they cancel on us. It is at a pretty significant increase in our normal contract tonnage rate. In fact it’s more than our tip fee is right now. There’s also a requirement for a letter of credit, and there’s also what’s called a put-or-pay paragraph, too. It specifies a minimum amount that they pay based on 150 tons a day,” Skelton said.
Then Skelton reviewed further with the board the rate scenarios he is considering.
The $48 tipping fee would only apply to non-contract customers, which is about 58% of the tonnage currently being taken in. Using that increased fee of $48 — the current tip fee is $34 per ton — applied to that tonnage would increase revenues by an estimated $689,000, he said.
“Of course, that’s only if we maintain that tonnage after we increase the rates,” the city manager said.
Landfill expansion
In concert with increasing tonnage, expansion of the landfill with construction of an additional cell is in the works, which puts an added strain on SMA finances.
“Estimated gross revenues for the Fiscal Year 24 budget, we have $1,850,000 budgeted as revenue. With this additional revenue from the tip fee increase, we would have about $2.5 million in revenues,” Skelton said.
“For cell 8A — applying these numbers to 8A — we’re estimating [construction cost for] 8A at $1.6 million, we have $510,000 available in the budget right now, so we’re short over a million dollars for cell 8A. With the additional revenue of $689,000, we would still be short $400,000. Hopefully, that $400,000 could be made up by additional revenue from additional tonnage if I can secure that tonnage. So for $48 applied, and if you’re looking at just cell 8A, we’re still $400,000 short,” Skelton explained.
“The next one is $52 a ton. Same scenarios, the excess shortage for cell 8A would be short $203,000. At $54 a ton, we would still be short $105,000. At $60 a ton, there would be a plus $190,000 over what we need for cell 8A based on estimates.
“As far as the minimum tip fee that I’m looking at on the landfill, $48 is definitely the minimum I’m looking at right now. Whether it stays at $48 is going to be based on whether I can get additional tonnage coming into the landfill. That’s where I’m at right now.
“If I can’t get the additional tonnage, then I’m gonna have to look at a higher rate. The last thing I would want to do is issue debt to construct a cell. I’d rather issue debt to buy equipment rather than to build a cell,” Skelton said, but admitted “if we have to, we have to.”
But with higher rates, the city runs the risk of losing tonnage.
“If we start having to get up around $60 tip fee, that’s going to create some issues for us as well, because I promise you we’ll lose tonnage, too,” Skelton conceded.
Skelton said no grants are available for landfill construction — “we’ve looked and looked, there’s just nothing out there” — but said a low-interest USDA loan remains a possibility.
Despite any funding hope Skelton provided, he tempered it with hurdles that will need to be overcome with the planned Phase 2 expansion.
Other hurdles
“These rate scenarios do not include any Corps of Engineers stream or wetland mitigation costs that we’re looking at for Phase 2 expansion. These costs are currently unknown. The scenarios do not provide for any type of savings to build upon for Phase 2 landfill expansion or equipment needs at this time,” he said.
“The increased costs of cell 8A, which we’re now estimating at $1.6 million, is attributed to the rising cost of labor and materials as well as possibly not having suitable clay on site for the construction. We’re preparing to bid this construction as soon as we can. Jamie [Phillips] has been having a hard time finding suitable clay on site. The last few cell constructions that we’ve done, we’ve been fortunate to have sufficient clay. If we’re not able to find sufficient clay that meets ODEQ (Oklahoma Department of Environmental Quality) regulations, that clay will have to be hauled in, and it won’t be cheap either.”
Skelton also provided the board with calculations for cell 8A life-of-site based on the current tonnage amounts.
“The current cell 8 and 8A would bump our life-of-site up to about 4.2 years, so this is why it’s imperative that we get cell 8A built as soon as possible,” he said. “In addition to cell 8A, we estimate that this cost right now to be about $1.6 million. Whatever the bids do come in at, we have to have that funding available so we can cover the encumbrance.
“So to fund cell 8A, it could require eliminating some scheduled projects. One of the projects that’s on the cutting table right now is the CDBG project for the landfill leachate line that would provide approximately $630,000 that we can put toward the $500,000 that we have budgeted. It could be a combination of budget cuts and new revenues that’s brought into the landfill if I’m able to secure additional tonnage. And the last resort would be issuance of debt. So revenues must be sufficient to cover any yearly, monthly debt service that would be required to issue that debt,” Skelton said.
In addition to planned construction of cell 8A, the SMA has been actively working on Phase 2 of the landfill expansion, which must begin soon.
“Even though we’re four to five years down the road, I would like to start construction of Phase 2 at least three years down the road minimum. But to do that, we’ve got to get past this Corps of Engineers mitigation issue,” Skelton told the board.
Skelton said a recent Supreme Court decision — Sackett v. Environmental Protection Agency — is very similar to issues the SMA faces with Phase 2 expansion, but Skelton and Montgomery are optimistic.
“John Robert believes the Supreme Court decision greatly favors us in this decision; our consultants a little bit more held back on it until the Corps of Engineers, the EPA fully interprets that decision and applies it to their rules. Whether that will be done within the next six months or the next year, I have no idea,” Skelton said. “[Our consultant] does state that what we’re needing from the Corps of Engineers is a jurisdictional determination to allow us to build Phase 2 of our landfill.”
Skelton said the consultant has prepared a report of the property — “it’s a rather lengthy report, I think it’s close to 300 pages” — that the city will submit to the Corps of Engineers “asking them to basically determine that they have no authority over what we’re trying to do.”
Other business
While the municipal landfill facility dominated the meeting, the SMA also tended to other business, including:
• Renewed the city manager’s contract.
• Renewed contracts with Rural Water Districts 3 and 4, as well as the privately owned C.D. (Charlie Davis) water distribution system for the purchase of treated water. Renewal includes a 3% increase from the current year, from $4.62 per thousand to $4.76 per thousand.
• Approved the transfer of title for a 2006 mobile home, which has been declared surplus in April, to Davonna Carroll upon payment of $10,049, which was the highest of two bids received.
Immediately following the SMA meeting, the Sallisaw Library Authority, Sallisaw Industrial Finance Authority and Sallisaw Economic Authority met. The boards are also comprised of the same members as those on the SMA. All three boards approved renewal of their manager contracts for the period July 1 to June 30, 2024.