Merced – Solid Waste Rate Study & 5-Year Financial Plan

R3 assisted the City of Merced with updating its solid waste and recycling rates following the repeal of a local utility tax that had previously funded waste programs. When the tax was eliminated in January 2018, the city needed to restructure its rate system to maintain service levels while complying with California’s strict Proposition 218 requirements for how municipalities can charge residents for waste collection. Building on a rate model we developed for Merced in 2014, our team calculated new rate adjustments that would cover the revenue gap and meet evolving state recycling mandates. Our work included analyzing whether additional revenues were necessary, developing multiple rate scenarios, and conducting surveys of comparable cities to ensure Merced’s pricing remained competitive.

The result was a transparent, Excel-based financial planning tool that allows the city to project revenues and expenses on a cost-of-service basis over a five-year period. This model helps Merced plan for future rate adjustments, capital improvements, and operational changes while maintaining compliance with both Proposition 218 and California’s expanding waste diversion requirements. We also reviewed the city’s municipal code to identify updates needed for new state laws on commercial recycling, organics collection, and food waste reduction. This comprehensive approach gave the city financial stability for its waste programs and a clear roadmap for adapting to future regulatory changes.