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Comprehensive Review of S olid W aste Collection and Disposal Options v2.1 196 10/22/12  Cost Allocation by Function. The Town’s budget is allocated between residential and commercial collection services. The color highlighted areas in Exhibit 14-4 show the groupings used by the Town to allocate costs to commercial or residential functions either by personnel count, equipment count or some other basis. SCS reviewed the allocation methodology used by the Town. The allocation methodology appears reasonable. We made some slight modifications associated with maintenance costs. The current methodology allocates these costs between residential and commercial services as a function of the number of trucks assigned to each service. We used the actual historical O&M cost data provided by the Town for each vehicle to allocate the O&M costs. The Town provided guidance on the assignment of personnel to residential or commercial functions. A summary of the allocation percentages between residential and commercial services is provided in Exhibit 14-4.  Fleet Usage, Fuel Costs (Operation and Maintenance), and Equipment Capital Cost. The Town maintains records on the maintenance costs for the solid waste collection vehicles, including fuel, maintenance and mileage statistics on a year-to-date and cumulative basis. As fuel prices fluctuate and for this analysis, a rate of $2.91 per gallon for diesel fuel was used. The Town’s records also include the date of purchase and the purchase value for the collection equipment. SCS assumed that vehicles would be replaced on a 7-year cycle, and those costs amortized over a 7-year period. No salvage value was assigned to equipment as a part of this economic analysis. Including salvage value would reduce estimated capital expenditures and amortized costs; therefore, the capital expenditure and amortized cost projections provided herein are conservative.  Capital Costs. The Pro Forma Model keeps track of the major capital expenditures associated with the various program scenarios evaluated. The amortized expenses for the various capital expenditures are included in the budget based on an interest rate of 4% (a variable which can be adjusted). The amortization period varies depending on the asset. For heavy equipment, a 7 year amortization period is assumed in most cases. For large facility expenses such as development of a transfer station or new landfill, 20 to 30 year amortization periods are selected.  Revenue. The Town receives revenue from various sources as shown in Exhibit 14- 6. The largest revenue source is fees from commercial collection services. A more detailed discussion on revenue sources is provided in Section 2.3. In addition, an evaluation of the commercial collection services, rates, and the changes in revenue that could occur if commercial services were modified or eliminated is presented in Appendix A. Market Assumptions for Alternative Disposal Facilities. SCS conducted a survey of available transfer stations and landfills within a 200-mile radius of the Town. The reported tip fees (see Section 2.2) ranged from $28 to $60 per ton. We understand that the reported market tip fees may vary for a given site depending on the owner of the facility, its relationship with those using the facility, the quantity of waste being disposed, and market conditions at any given time. However, the tip fees seem consistent with current market conditions encountered by SCS in the region. The