Municipal Waste Management Costs and Legal Requirements in Georgia

The municipal waste management system in Georgia incurs various costs including waste collection, transportation, disposal, and administration. Municipal waste charges must adhere to legal requirements such as the Polluter Pays principle and limits on charges. The Law of Georgia on Local Fees regulates the maximum charges applicable to residential, commercial, and institutional waste producers. Compliance with these legal requirements ensures fair distribution of waste management costs among stakeholders.

• Waste Management
• Municipal Services
• Georgia Law
• Waste Charges
• Cost Regulations

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1. SWM Service Costs, Chart of Accounts Dr. Hakan Mat 19 - 20 November 2019

2. Content How to determine the waste service fee and how to administer the fee SWM Service Charges and Costs Revision of Chart of Accounts

3. Municipal Service Charges & Costs Municipal waste charge should cover the following solid waste management (SWM) costs of the municipality: Solid waste collection costs from residential, commercial and institutional waste producers including transportation to the landfills and / or transfer stations (services provided by the municipal subsidiary companies / not-for-profit organizations) (net off recycling revenues, grants, etc.) Street sweeping and cleansing costs (services provided by the municipal subsidiary companies / not-for-profit organizations) Gate fee = Solid waste disposal costs at the landfill or the transfer station (cost for transportation from transfer stations to the landfills is a service provided by the SWMCG and paid through Gate Fees) General administration costs of municipal SWM services (management, training, PR and public awareness, billing and collection) (services provided by municipalities) Investment and financing costs of solid waste collection, street sweeping and cleansing costs (services provided by municipalities)

4. Legal requirements on municipal SWM charges Waste Management Code of Georgia stipulates implementation of Polluter Pays principle: Polluter Pays means that the producer or holder of waste shall cover the full costs of solid waste management services If some portion of the SWM costs are covered by grants then full costs shall not be recovered directly from waste producers (municipal waste charges = full costs grants)

5. Legal requirements on municipal SWM charges Law of Georgia on Local Fees (1998) stipulates the following: Municipal waste charges collected shall not exceed the cost of the SWM services (Profits are not allowed) There are upper limits on municipal waste charges (residential: 3 GEL/capita/month; commercial & institutional: 25 GEL/m3) For residential billing purposes, household size shall not exceed 4 persons per family served Municipal waste charges shall not be applied to waste producers where municipal SWM services are not available

6. Legal requirements on municipal SWM charges Responsibilities of the Municipal Councils (Sakrebulo) include the following: Determination and adjustment of municipal waste charges for residential, commercial & institutional waste producers Development and application of the municipal waste charge calculation methodology Development and implementation of billing and collection procedures

7. Findings in the Municipal SWM Performance Audit Report (2015) of the State Audit Office of Georgia Where applied, municipal waste charges are unfounded (actual SWM costs and revenues are not taken into account) and do not cover the actual cost of SWM services Municipalities neither consider nor observe tariff system analytically

8. Calculation of Municipal SWM Charges Take into account the legal requirements on municipal waste charge setting Define all SWM services provided for different waste producers Determine beneficiaries of the SWM services to whom municipal waste charges shall be applied Determine the actual full cost of all SWM services provided (net of grants, recycling and other revenues) Determine service-based municipal waste charges by considering legal requirements and full cost recovery principle

9. Options for setting municipal waste charges Option-1: Coverage of Cash O & M Costs only (the lowest level) Option-2: Coverage of Cash O & M Costs + Depreciation Costs Option-3: Coverage of Cash O & M Costs + Depreciation Costs + Investment & Financing Costs (the highest level) The "ideal municipal waste charge level is Option 3 However, a time-phased approach to adjust the municipal waste charges from Opton-1 to Option-3 can be considered which will also provide a transition / adaptation period to the municipalities by considering affordability which will require governmental subsidies for the financing of the gap until full cost recovery shall be achieved.

10. Major financial parameters MWMP Period (2018 2022) 2019 2020 2021 2022 2017 (Actual) 2018 (Actual) 2016 (Actual) Financial Parameters (Projected) (Projected) (Projected) (Projected) SW Charge Coll. Rate (%) - Residential 50 55 60 65 70 75 80 - Legal ent. 75 78 80 83 86 90 95 SW Collect. Cost (Gel/Ton) 90 92 95 98 100 105 110 - Residential - Legal ent.

11. Major financial parameters? MWMP Period (2018 2022) 2019 2020 2021 2022 2017 (Actual) 2018 (Actual) 2016 (Actual) Financial Parameters (Projected) (Projected) (Projected) (Projected) SW Disp.Cost (Gel/Ton) - - - - 100 100 100 Total SW Coll. + Disp. Cost (Gel/Ton) 90 92 95 98 200 205 210 SW Charge (Gel/Ton) 45 45 60 75 150 175 210 - Residential - Legal ent. Cost Cover. Ratio (%) 50 49 63 77 75 85 100

12. Sensitivity Analysis Sensitivity Analysis needs to be conducted by changing assumptions to be able to assess their impact on costs and financials (identify, monitor and control the most important parameters) What if O & M costs (solid waste collection and street cleaning) and Gate Fees of the SWMCG increase by 10%? What if investment costs increase by 10%? What if recyclable revenues decrease by 20%? What if SWM charge payment rate decrease by 20%? What if recycled materials decrease by 20%? Risks and risk mitigation measures need to be analyzed having sufficient sources for the financing of investment and operating costs acceptance and willingness to pay the higher municipal waste charges by the waste producers

13. Calculate of Municipal SWM Charges Determine planning period (5 years in WMPs; regular update) Project macro-economic variables Forecast waste quantities by considering growth in population and service coverage ratio, specific waste generation and recycling (separate collection) activities Forecast full cost of SWM service provision Conduct sensitivity analysis by changing values of key parameters to assess potential fluctuations in cost of SWM services Set cost covering municipal waste charges for residential, commercial and institutional waste producers throughout the whole planning period by considering affordability

14. Key parameters in Calculating Municipal SWM Charges Macro-economic variables Gross Domestic Product (GDP) Inflation Real Changes in Input Prices (fuel, electricity, personnel, etc.) Interest Rates Disposable Household Income Waste quantities Population in responsibility area (capita) and service coverage ratio (%) Specific waste generation (kg/capita/day) and total waste generation by producers (tons/year) Quantity collected, transported through transfer stations, recycled and landfilled (tons/year)

15. Key parameters in Calculating Municipal SWM Charges SWM service provision costs (GEL/year & GEL/ton) O & M costs (solid waste collection & transportation and street cleaning) Gate fees of the SWMCG Depreciation costs Investment costs (new, replacements / renewals) Financing costs SWM revenues Unit municipal waste charge for residential, commercial and institutional waste producers (GEL/ton) Total billed and collected municipal waste revenues for residential, commercial and institutional waste producers (GEL/year) Unit selling price of recycled materials (GEL/ton) Total recyclable material revenues (GEL/year) Total other SWM service revenues (construction waste, etc.) (GEL/year)

16. Obtaining actual costs & revenues from mixed municipal accounts SWM service provision costs (GEL/year) Staff costs (O & M, administration, support staff) Fuel, repair & maintenance, insurance costs of vehicles used for solid waste collection, street cleaning and SWM administration purposes Contracted-out services costs (out-sourced collection & transport, vehicle and container repair & maintenance, SWM revenue billing and collection services) Depreciation costs of assets used in municipal SWM services (vehicles, containers, other equipment, buildings) Investment costs (new, replacements / renewals of SWM assets) Financing costs of SWM loans utilized

17. Obtaining actual costs & revenues from mixed municipal accounts SWM revenues (GEL/year) Total billed and collected municipal waste revenues for residential, commercial and institutional waste producers Total billed and collected recyclable material revenues Total other billed and collected SWM service revenues (construction waste, etc.)

18. Obtaining actual costs & revenues from mixed municipal accounts Reorganization of standard chart of accounts of the municipalities to keep track of the SWM costs and revenues Sub-accounts for each SWM cost/revenue item (not to be accounted-for under others which cannot be traced) Establish systems and procedures to book SWM costs and revenues Evaluate financial performance and report regularly (monthly) Compare financial performance with others (benchmarking), feedback and improve

19. New municipal accounts for SWM services Accounting & Reporting Inst. Decree No. 1321, Dec. 28, 2007, issued by the MoF Account No. Account Title 7100 Wages and Salaries (Generic Code) 7190 Wages and Salaries of the SWM Services Staff 7200 Goods and Services (Generic Code) 7219 Salaries of Contracted Persons for the SWM Services 7229 Business Trips for the SWM Services 7239 Office Expenses for the SWM Services 7249 Office Expenses for the SWM Services

20. New municipal accounts for SWM services Accounting & Reporting Inst. Decree No. 1321, Dec. 28, 2007, issued by the MoF Account No. Account Title 7258 Food Expenses of the SWM Services Staff 7259 Medical Expenses of the SWM Services Staff 7269 Clothing Supplies, Uniforms and Personal Hygiene Expenses of the SWM Services Staff 7271 Fuel & Lubricants Expenses of Vehicles for the SWM Services 7272 Repair & Maint. Expenses of Vehicles for the SWM Services 7273 Repair & Maint. Expenses of Containers for the SWM Services 7274 Repair & Maint. Expenses of Buildings for the SWM Services

21. New municipal accounts for SWM services Accounting & Reporting Inst. Decree No. 1321, Dec. 28, 2007, issued by the MoF Account No. Account Title 7290 All Other Goods and Services (Generic Code) 7291 Gate Fees Paid to the SWMCG 7292 Contracted-out Services for Solid Waste Collection and Transportation 7293 Contracted-out Services for Street Sweeping 7294 Contracted-out IT Services for SWM 7295 Contracted-out Services for Other SWM Services

22. New municipal accounts for SWM services Accounting & Reporting Inst. Decree No. 1321, Dec. 28, 2007, issued by the MoF Account No. Account Title 7300 Depreciation Expenses of Fixed Assets (Generic Code) 7311 Depreciation Expenses of Collection Vehicles 7312 Depreciation Expenses of Containers 7313 Depreciation Expenses of SWM Buildings and Structures 7314 Depreciation Expenses of SWM Office Equipment 7315 Depreciation Expenses of Other SWM Assets

23. New municipal accounts for SWM services Accounting & Reporting Inst. Decree No. 1321, Dec. 28, 2007, issued by the MoF Account No. Account Title 7400 Interest Expenses (Generic Code) 7411 Interest Expenses of KfW Loan for SWM Equipment 7412 Interest Expenses of EBRD Loan for SWM Equipment 7413 Interest Expenses of ADB Loan for SWM Equipment 7414 Interest Expenses of Local Loans for SWM Equipment 7415 Interest Expenses of Short-term Bank Credits

24. New municipal accounts for SWM services Accounting & Reporting Inst. Decree No. 1321, Dec. 28, 2007, issued by the MoF Account No. Account Title 7800 Other Expenses (Generic Code) 7811 Rental Expenses of SWM Collection Vehicles 7812 Rental Expenses of SWM Operation / Administration Vehicles 7813 Rental Expenses of Other SWM Equipment and Assets 7814 Communication Expenses of SWM 7815 Insurance, Tax and Similar Expenses of Collection Vehicles 7816 SWM Charge Collection Expenses

25. New municipal accounts for SWM services Accounting & Reporting Inst. Decree No. 1321, Dec. 28, 2007, issued by the MoF Account No. Account Title 6400 Other Revenues (Generic Code) 6421 SWM Service Charge Revenues From Residential Customers 6422 SWM Service Charge Revenues From Institutional Customers 6423 SWM Service Charge Revenues From Commercial Customers 6424 SWM Service Charge Revenues From Other Customers 6425 Sales Revenues From Recyclable Waste 6425 Other Sales Revenues From SWM Services

26. Thank you very much for your attendance! Dr. Hakan Mat hakanmat@superonline.com