Contact for Trash by Scott D. Lazenby

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The reading (Contacting for Trash) has Discussion Questions beginning on page 137. Answer questions 1, 2, 4, and 5on pages 137 and 140.

1. What should Assistant City Manager Chris Smith recommend to the city manager? Use the attached worksheet (Table 1) and the analytical methods described in the sidebar in this chapter to formulate a recommendation for the city manager. Here are steps to analyzing the cost of the two options. (You may find that entering the table into an Excel spreadsheet simplifies the computational tasks.)
   1. Step 1. Complete the annual costs for the row labeled Total Manual System. Do the same for the row labeled Total Automated System before equipment. Then compute the total annual costs for the row labeled Total Automated System with new equipment. (Note that net equipment cost is computed. Add the annual lease/ purchase cost to the labor and workers' comp cost to arrive at amounts for Total Automated System with new equipment.)
   2. Step 2. Compute the row labeled Annual Savings. Note this is the cost before investment in new equipment. Then compute the next row, Cumulative savings, which is a running total of the cost savings from automation.
   3. Step 3. Compute the Simple payback period using the formula for uneven cost streams described in the sidebar.
   4. Step 4. The next section involves computing the present value of the two options, the manual and automated collection systems. Begin by completing the row labeled Net annual savings. This is the net savings from automation including the cost of the new equipment, both leased and purchased. Then compute the discount factor using the formula described in the sidebar. Assume a 6 percent discount rate for this problem. Then compute the row labeled Discounted savings by multiplying each net annual savings by the discount factor for that year. Sum the row to get the net present value (NPV) of savings.
   5. Step 5. An alternative approach is to compute the present value of the manual system costs, compute the present value of the automated system costs, sum the two rows, and compute the difference in the sums. This value should be the same as the NPV of savings found in Step 4. If the city manager asks about the present value of the two options, you will have those figures readily available.
2. City staff in Newglade analyzed the questions of automation and privatization simultaneously. Was this the best way to proceed, or should these issues have been addressed separately? Give reasons for your answer.
3. As the city manager, how would you have responded to the memo of July 10 in which the public works director opposed consideration of a merger of commercial and residential sanitation services? Would you include a combined system in your policy recommendation?
4. Under what circumstances would it be desirable to implement an automated collection system immediately? If such a change should be made, should the entire system be automated at once or gradually? What considerations factor into such a decision?

Residential Sanitation Automation Worksheet
	YEAR 1	YEAR 2	YEAR 3	YEAR 4	YEAR 5
MANUAL SYSTEM
Labor Costs:
Inflation factor	1.00	1.05	1.10	1.16	1.22
# Routes	16	16	17	17	18
# Drivers	22	22	23	23	24
# Superviors	2.50	2.50	2.50	2.50	2.50
Labor Costs:	1,708,720	1,794,156	1,960,113	2,058,118	2,245,089
Workers' Comp.	32,400	34,020	37,345	39,212	42,963
Equipment Costs:
# Trucks Purchased	2	1	2	1	2
Cost (x inflator)	320,000	168,000	352,800	185,220	388,962
Vehicle O&M	434,000	455,700	508,390	533,810	593,471
Total Manual System	(Step One)	(Step One)	(Step One)	(Step One)	(Step One)
AUTOMATED SYSTEM
Labor Costs:
# Routes	13	13	14	14	14
# Drivers	18	18	19	19	19
# Superviors	3	3	3	3	3
Labor Costs:	1,432,080	1,503,684	1,655,117	1,737,873	1,824,767
Workers' Comp.	6,627	6,959	7,712	8,098	8,503
Total Automated System Before Equipment	(Step One)	(Step One)	(Step One)	(Step One)	(Step One)
Equipment Costs:
# Trucks Purchased	16
Cost, new trucks	2,560,000
Salvage, manual trucks	-1000000
New Containers	2,468,571
Net equipment cost	4,028,571
lease/purchase cost	547,354	547,354	547,354	547,354	547,354
Total Automated System with new equipment	(Step One)	(Step One)	(Step One)	(Step One)	(Step One)
Annual Savings, automated system, before new equipment investment
Annual Savings	(Step Two)	(Step Two)	(Step Two)	(Step Two)	(Step Two)
Cummulative Savings	(Step Two)	(Step Two)	(Step Two)	(Step Two)	(Step Two)
Simple Payback Period	(Step Three)	(Step Three)