Landfill Full Cost Accounting Guide for New Zealand

Acknowledgements

Preface

1 Introduction

2 Current Overseas and New Zealand Practice

3 Legislative Framework

4 Landfill Full Cost Accounting

5 Model Input Parameters

6 Income Streams

7 Model User Guide

8 Expanding the Model: Other Waste Management System Costs

9 Illegal Dumping

Glossary

References

Appendix A: Landfill FCA Model - Overview, Structure and Algorithm Flowcharts

Appendix B: Landfill FCA Model Input Costs - Default Values

Appendix C: FCA Landfill Model - Description of Costs not included in the Model

Appendix D: Financial Assurance

Appendix E: Typical Example - District Landfill Site

Appendix F: Landfill FCA Model - Blank Copies of Worksheets

2 Current Overseas and New Zealand Practice

2.1 United States of America

The United States Environmental Protection Agency (USEPA) has taken the initiative in promoting the increased use of FCA for solid waste management. The USEPA has worked closely with the US Government Finance Officers Association (GFOA) towards achieving this goal. It was with this goal in mind that the GFOA approved a recommended practice on The Application of Full Cost Accounting to Solid Waste Management Activities in 1998 (Gauthier, 1998). The USEPA and GFOA define full-cost accounting as "a method of accounting for all monetary costs of resources used or committed for municipal solid waste (MSW) services". The USEPA states that full-cost accounting "provides decision-makers with the whole picture of MSW costs in their community on an ongoing basis".

The GFOA's FCA manual published in conjunction with the USEPA February 2000 (GFOA, 2000) details a comprehensive menu-based modelling approach. The model presented in this Guide follows a similar logic, but is deliberately simplified in some areas to ease data entry and avoid the risk of gross errors due to misinterpretation of input data sets, duplication or omission.

2.2 Australia-New South Wales

The New South Wales Environmental Guidelines: Solid Waste Landfills (NSW EPA, 1996) states that the Environmental Protection Authority (EPA) "uses economic and educative tools alongside regulatory measures to achieve desired environmental outcomes". The broad goal of promoting waste reduction and the need to cover the cost of environmental externalities created by landfills are recognised in New South Wales through the promotion of true cost pricing at landfills and a levy on waste disposal.

2.3 New Zealand

To ascertain current New Zealand local authority practices in relation to FCA for landfills, data from the following sources were used:

• the 1998/99 National Landfill Census (Ministry for the Environment 2000)
• a survey of local authority waste managers in 2001, undertaken as part of the Guide preparation process.

2.3.1 1998/99 National Landfill Census

The 1998/99 National Landfill Census reported the following feedback.

• 63% of landfill operators had read the Landfill Guideline: Landfill Full Costing Guidelines Ministry for the Environment, 1997a). Of these, 77% (or about 45% overall) found the guide useful.
• Landfill operators reported that the guidelines are not useful for commercial operators, airspace utilisation needs to be related to financial performance, and the guidelines are overly complicated.
• 40% of landfills charged through general rates and 45% through user charges (or a combination of both).
• 26% of landfills operated a differential charging system for wastes at their landfill, compared with 47% who did not.
• Local authorities need to identify and assess the full costs of both currently operating and closed landfill sites.

2.3.2 2001 Survey of Local Authority Waste Managers

In early May 2001 all New Zealand TLA managers were sent a postal questionnaire, instructions for completing the questionnaire, a draft table of contents for the new FCA guide, a covering letter from the Ministry for the Environment, and a stamped addressed envelope for returning the questionnaire.

In total, 74 questionnaires were sent out to TLA waste managers. Responses were received from 58, of whom five said the questionnaire was not particularly relevant to their needs.

Data from the questionnaires were entered into a Microsoft Access database. Questions that entailed a text response were analysed manually. All questionnaire responses were treated as confidential and data were aggregated. The results have been categorised in terms of:

• the 1996 guidelines
• landfill funding and charging
• illegal dumping
• transitioning from current charging regimes.

Analysis of the questionnaire data indicated that there is currently huge variability in the manner of charging at landfills throughout New Zealand. This varies from 'notional' charging, based largely on known annual operations and overhead costs, to full cost pricing and charging (mainly at larger and privately operated facilities). In between, a range of rates-based and other formulae are used to set gate rates, usually based on a simple build-up of operations costs taking into account 'prior charges'. Often the gate rate set is quite artificial, and in some instances it is clear that gate rates are either cross-subsidised or transfer pricing methods are employed.

In only a few instances can a landfill gate rate be clearly identified as reflecting true cost. Even in 'commercial' cases the actual gate rate is affected by:

• waste flows (directly related to cashflow objectives)
• customer arrangements/volumes
• waste type
• timing
• actual cost of airspace development.

Moving to a more consistent basis for charging (or at least determining the true dollar cost of disposal) is essential if a nationally consistent, integrated waste disposal strategy is to be implemented, such that waste reduction, recycling and other initiatives fit realistically into the overall economic mix of waste disposal costs.