HomeMy WebLinkAboutIR 7294 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7294
�b�sonr�Q To the Mayor and Members of the City Council June 14, 1988
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Subject; CITY OF FORT VORTH GARBAGE BAG PROGRAM UPDATE
BACKGROUND
On April 12, 1988 (M&C G-7536), the City Council approved the policy
change of discontinuing selling garbage bags. The change was
recommended because of decreasing bag sales, the prospects of a
significant price increase for the purchase of bags, and the belief
that bags of comparable quality were more conveniently available to
citizens in retail stores.
On June 2, 1988 (I.R. No. 7288), additional information concerning
garbage bags was provided to the City Council. It was also indicated
that Fort Worth Clean City, Inc. , was working with the Southland
Corporation (7-Eleven) to determine whether they would market 2.0 mil
garbage bags.
CHANGES IN POLYETHYLENE RESIN MARKET
The primary cost associated with garbage bags is the cost to purchase
bags from manufacturers. In January 1987 the cost of liner grade
resin was S.23 per pound. Because of strong overseas markets,
supplies of resin available for domestic use decreased and resin
prices increased. In September 1987 resin was S.35 per pound. It
increased to S.42 by January 1988 and S.47 by April 1988. In April
1988 a Shell oil plant in Louisianna was destroyed that accounted for
almost 10 per cent of ethylene which is used to manufacture resin. it
is anticipated that resin supplies will become even more limited.
Prices are expected to increase to S.52 per pound by July 1988 and
S.60 per pound by December 1988.
The volatility of the resin market has caused plastic bag
manufacturers to reduce the weights of bags, reduce the numbers of
bags in packages, and increase prices. It has also caused suppliers
to not bid on fixed price annual contracts. It has been indicated
that because of these changes in the resin market the cost for the
City to purchase bags under a new contract would likely be between
$5.00 and 56.00 per roll.
RESUMPTION OF BAG SALES BY CITY
Assuming that bags can be purchased by the City for S5.00 per roll,
bags are sold at three locations, and 100,000 rolls of bags are sold,
it is estimated that the expenses associated with bags would be as
follows:
DIRECT COSTS
Cost 100,000 rolls 5500,000
Personnel 20,471
i Supplies 3,500
ISSUES} BY THE CITY MANAGER FORT WORTH, TEXAS --
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7294
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;Q410#P?,r To the Mayor and Members of the City Council June 14, 1988
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Subject; CITY OF FORT WORTH GUMAGE BAG PROGRAM UPDATE
Equipment 3,800
Armored Car Service 2,730
Subtotal $530,501
INDIRECT COSTS (OTHER DEPTS.)
Sales - Tax Office S 45,425
Sales - Branch Library 18,500
Treasurer/Cashier 48,000
Subtotal 5111,925
Total S642,426
Based on the previously stated assumptions and the intention to
recover either (1) all of the direct costs associated with bag sales,
(2) all of the direct costs and a portion of the indirect costs
associated with bag sales, or (3) all of the direct and indirect costs
associated with bag sales, the following pricing alternatives are
available:
(1) (2) (3)
Price per roll S5.59 $6.06 S6.52
Tax .41 .44 .48
Total S6.00 S6.50 57.00
If the total direct and indirect costs of the Citv to resume selling
garbage bags are considered, it appears that the private sector could
sell the same quality of bag that the City would sell for
approximately the same price. It is, therefore, recommended that the
City not resume sales of garbage bags.
Additional information may be provided upon request.
6
IN--bouglas Harman
City Manager
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS ---