Question

The assignment is directly below-- Its a public policy question, with some calculations based on discounting-- Read below

As you know, Soundville currently has no municipal trash collection and so residents must either burn their trash individually or take it to one of several transfer stations located around the town. Recent legislation has put restrictions on the outside burning of trash in populated areas, and residents of the town have been complaining about the inconvenience of carrying their own trash to the transfer stations. And the town is growing; recent mid-decade census estimates show that we are now the largest town in North Carolina that has no municipal trash collection system.

The town council has assigned me the task of asking you to analyze three different proposals for trash collection. I will need your report by February 10.

The first proposal entails the town organizing a sanitation department. Projections show that the town would need one garbage truck, costing $100,000 with annual maintenance costs of $18,000. Two new town employees whose salaries and benefits would cost $22,000 per year per employee would need to be hired. A supervisor would be necessary at salary and benefits project­ed to run about $45,000 per year. The truck would reach the end of its useful life in fifteen years and thus would need to be replaced with a new truck costing about the same amount of money (pre-discounted). This proposal would include once a week back door (meaning that trash cans would not have to be put on the curb) trash collection.

The second proposal would involve buying a automated side load (ASL) garbage truck. The manufacturer of this truck says that it is so advanced that a sanitation supervisor would be unnecessary and I could take on the few additional duties of supervising sanitation. However, since I would be performing these duties in addition to my normal duties, a new part-time administrative assistant would need to be hired at a salary of $11,000 per year (no benefits for part-time employees). There would only need to be one new sanitation employee hired at the same rate as above. Rather than $100,000, the new truck would cost $185,000 and would have slightly higher annual maintenance costs of $20,000. This truck’s useful life is promised to be ten years so it would need to be replaced after each ten-year cycle. This proposal would include once a week curbside trash collection. Residents would be supplied with special garbage containers at no cost; the city paying a one-time fee of $12,000 for the cans.

The third proposal entails contracting with a private company for trash collection. Waste Disposal Inc. (WDI) has indicated to the town that it would provide trash collection services on a contract basis for a fee of $175,000 per year. Their bid assumes twice a week curbside trash collec­tion. Residents would be supplied with special garbage containers as part of the WDI contract (at no cost to residents).

You should assume a 30 year time frame for your compari­sons and a 3% discount rate.

Looking only at the total cost to the town government, which of these three alternatives would you recommend to the council? If you added a second criterion of effectiveness of garbage removal (defined as how often garbage is picked up), what would your recommendation be? If you added a third criterion of residents’ convenience (defined as how little work residents must do to dispose of garbage) what would your recommendation be?

The council is also interested in whether this is an exhaustive list of options for trash disposal in Soundville. If you can develop any other ideas please list them and, if the council finds them interesting, they may ask you to analyze those against the three given options

Answer 1

Cash Flows for Porposal 1	22,56,651	= NPV (3%, CashflowY1:CashFlowY30)
Y1	207000	=truck cost + maintenance + salaries
Y2	107000	= maintenance + salaries
Y3	107000
Y4	107000
Y5	107000
Y6	107000
Y7	107000
Y8	107000
Y9	107000
Y10	107000
Y11	107000
Y12	107000
Y13	107000
Y14	107000
Y15	107000
Y16	207000	= replace truck cost + maintenance + salaries
Y17	107000
Y18	107000
Y19	107000
Y20	107000
Y21	107000
Y22	107000
Y23	107000
Y24	107000
Y25	107000
Y26	107000
Y27	107000
Y28	107000
Y29	107000
Y30	107000

Cash Flows for Porposal 2	14,69,631	= NPV (3%, CashflowY1:CashFlowY30)
Y1	250000	=truck cost + maintenance + salaries + one time can cost
Y2	53000	= maintenance + salaries
Y3	53000
Y4	53000
Y5	53000
Y6	53000
Y7	53000
Y8	53000
Y9	53000
Y10	53000
Y11	238000	=truck cost + maintenance + salaries
Y12	53000
Y13	53000
Y14	53000
Y15	53000
Y16	53000
Y17	53000
Y18	53000
Y19	53000
Y20	53000
Y21	250000	=truck cost + maintenance + salaries
Y22	53000
Y23	53000
Y24	53000
Y25	53000
Y26	53000
Y27	53000
Y28	53000
Y29	53000
Y30	53000

Cash Flows for Porposal 2	34,30,077	= NPV (3%, CashflowY1:CashFlowY30)
Y1	175000	=per year cost
Y2	175000
Y3	175000
Y4	175000
Y5	175000
Y6	175000
Y7	175000
Y8	175000
Y9	175000
Y10	175000
Y11	175000
Y12	175000
Y13	175000
Y14	175000
Y15	175000
Y16	175000
Y17	175000
Y18	175000
Y19	175000
Y20	175000
Y21	175000
Y22	175000
Y23	175000
Y24	175000
Y25	175000
Y26	175000
Y27	175000
Y28	175000
Y29	175000
Y30	175000

Hence , Summarizing the cost for 3 proposals to the town:

1. Proposal 1 Total Cost = $2,256,651

2. Proposal 2 Total Cost = $1,469,631

3. Porposal 3 Total Cost = $3,430,077

So in terms of Cost, the Poposal 2 makes sense as it is the lowest cost among all.

Proposal 3 stands out in terms of garbage collection twice a week from curbside.

Proposal 1 involves once a week back door collection, that is , citizens do not have to go Curbside and hence Propsal 1 stands out int his regard

Overall recommendation would depend on how we view our municipal services inhouse. While the private option mind sound costly, but given the fact that they can be held accoutnable, they would always be on job. While at the same time , if the municipal services are relaxed and our people are lazy and do not do a good job (as usually is case with government), it is better to outsource to private parties- so that the job gets done atleast

Additional Proposlas might be:

1. Get Manpower outsourced rather than the whole project- this is where we overcome the problem mentioned above effectively

2. Else another proposal is to move the pricing of the private party into per house collectedprice rather than a fixed fee. This will effectively allow to lower the cost if there are less resident houses. Further Private party can be allowed to provide special services on additional charges from citizens, like collecting from backdoor on small payment fees. This additional preference can be given so that the private party reduces price per home for others, thus effectively subsidizing some from others and also helping make the project attractive for private parties at a lower cost.