BULGARIA SPENDING REVIEW Improving Efficiency and Effectiveness of Waste Management Spending DISCLAIMER This paper is developed by the World Bank team. The findings, interpretations and conclusions expressed do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The study was produced to provide advisory support to the Ministry of Finance (MoF) and does not necessarily represent the views of Government of Bulgaria or of the MoF. ACKNOWLEDGEMENTS This paper was led by a core team led by Stella Ilieva (Senior Economist and Task Team Leader) and Kremena Ionkova (Senior Urban Development Specialist) and is prepared by Gerard Simonis (Waste Management Expert) focusing on efficiency analysis, Rene Boesten (Waste Management Expert), focusing on effectiveness analysis, Tzvetanka Kostadinova (Waste Management Expert), Vincent Belinga (Economist). The team is grateful to Lalita Moorty, Practice Manager, David Sislen, Practice Manager, and Antony Thompson, Country Manager, for their valuable support and guidance. Eva Yoneva and Ana Petkova provided research assistance while Adela Delcheva Nachkova provided administrative support. The team is extending appreciation to the officials of the Ministry of Finance, the Ministry of Environment and Water, the Executive Environment Agency, the National Association of Municipalities in the Republic of Bulgaria, and NSI for their excellent collaboration and feedback during our work. In addition, the team expresses its appreciation to officials from the municipalities of Sofia, Septemvri, and Dolna Mitropolia for participating actively in the Waste Management Working Group and officials and staff of municipalities of Gabrovo, Levski, Pavlikeni, Plovdiv and Veliko Tarnovo for the hospitality and excellent collaboration in providing detailed information and sharing their views. Country Manager: Antony Thompson Practice Manager: Lalita Moorty Task Team Leader: Stella Ilieva 2 Table of Contents ABBREVIATIONS AND ACRONYMS ....................................................................................... 5 Executive Summary ........................................................................................................................ 6 Introduction ................................................................................................................................... 12 1. Key Challenges in Waste Management Spending ................................................................. 13 High waste management spending................................................................................................ 13 Efficiency of spending appears low .............................................................................................. 16 Effectiveness of waste management spending could be improved ............................................... 19 2. Efficiency of waste management spending ........................................................................... 20 General .................................................................................................................................. 20 Waste collection & transportation ......................................................................................... 22 Waste separation.................................................................................................................... 25 Waste landfilling ................................................................................................................... 27 Waste composting ................................................................................................................. 28 Public area cleaning............................................................................................................... 28 Total operational costs........................................................................................................... 30 3. Effectiveness of waste management ...................................................................................... 31 General .................................................................................................................................. 31 Waste collection and pre-treatment by municipalities .......................................................... 33 Collection of packaging materials (dry recyclables) by PROs .............................................. 35 Total amounts of dry recyclables .......................................................................................... 36 Recommendations ......................................................................................................................... 39 Annex 1. References ..................................................................................................................... 43 Annex A-1 Analysis of Actual Waste Collection Costs ............................................................... 44 Annex A-2. Analysis of Estimated Waste Collection Costs ......................................................... 45 Annex B-1 Waste Treatment Actual Costs ................................................................................... 47 Annex B-2 Waste treatment Estimated Costs ............................................................................... 49 Annex B-3 Cost calculation landfills ............................................................................................ 50 Annex C-1 Public area cleaning actual costs ................................................................................ 52 Annex C-2 Estimated public area cleaning costs .......................................................................... 53 Annex D Template for cost calculation ........................................................................................ 54 Annex E National cost assessment ............................................................................................... 55 Figure 1: Bulgaria spends more on waste management and generates more waste. .................... 13 Figure 2: Waste management spending is an important spending item for general government and municipalities budgets. ................................................................................................................. 14 Figure 3: Waste management spending has been on the rise........................................................ 15 Figure 4: …in line with improved revenue collection .................................................................. 15 Figure 5: Collection of waste and public area cleaning drive growth of waste management spending ........................................................................................................................................ 15 Figure 6: Recent growth in total spending was driven by municipalities that outsource collection and transportation of waste in large municipalities ...................................................................... 16 Figure 7: Current spending per ton of municipalities that provide services in-house appears higher than in municipalities outsourcing waste management services................................................... 17 3 Figure 8: There are large variations in current spending per ton of generated waste by group of municipalities ................................................................................................................................ 18 Figure 9: Despite significant investments in building regional waste management systems ....... 20 Figure 10: …the share of landfilled waste remains significant, albeit falling .............................. 20 Figure 11: In contrast to international experience, largest municipalities pay the most per ton of collected waste .............................................................................................................................. 23 Figure 12: Variation of cost/ton per municipality is high ............................................................. 23 Figure 13: Actual costs of in-house services are almost double the estimated costs .................... 25 Figure 14: Actual costs of outsourced activities are by 67 percent higher than estimated costs .. 25 Figure 15: Gate fees for separation vary ....................................................................................... 26 Figure 16: Actual gate fees for landfilling costs are broadly comparable across municipalities . 27 Figure 17: Actual public area cleaning costs are highest for largest urban municipalities ........... 29 Figure 18: Recycling rates in the EU ............................................................................................ 36 Table 1: Actual Collection & Transportation Costs per Ton of Collected Waste, 2016 (BGN/ton) ....................................................................................................................................................... 23 Table 2: Estimated Collection Costs per Ton of Collected Waste, 2016 (BGN/ton) ................... 24 Table 3: Estimated Separation Costs per Ton of Separated Waste, BGN/ton .............................. 26 Table 4: Comparison of Actual and Estimated Waste Separation Costs, BGN/ton ..................... 26 Table 5: Comparison of Actual and Estimated Waste Separation Costs, BGN/ton ..................... 27 Table 6: Actual Cleaning costs (BGN/inhabitant) ........................................................................ 29 Table 7: Comparison of Actual and Estimated Public Area Cleaning Costs, BGN/inhabitant .... 30 Table 8: Average public area cleaning cost in European countries .............................................. 30 Table 9: Difference between actual and estimated spending for the sample of 20 municipalities 31 Table 10: Difference between actual and estimated spending for all municipalities ................... 31 Table 11: New recycling targets for packaging waste .................................................................. 32 Table 12: Waste Generation and Treatment, 2016 ....................................................................... 34 Table 13: Amounts of municipal waste collected and recovered only by municipalities in newly established RWMCs, 2016............................................................................................................ 34 Table 14: Waste recycling via municipalities, ton ........................................................................ 35 Table 15: Waste Recycling via PROs ........................................................................................... 35 Table 16: Total Waste Recycling .................................................................................................. 36 Table 17: Typical Morphology of Municipal Solid Waste, 2012-15............................................ 37 Table 18: Waste and recyclables, ton ........................................................................................... 38 Table 19: Estimated amount of packaging waste in MSW ........................................................... 38 4 ABBREVIATIONS AND ACRONYMS BGN Bulgarian Lev COFOG Classification of the Functions of Government EEA Executive Environment Agency EMEPA Enterprise for Management of Environment Activities EU European Union GDP Gross Domestic Product GOB Government of Bulgaria MOEW Ministry of Environment and Water MOF Ministry of Finance MSW Municipal Solid Waste NAMRB National Association of Municipalities in the Republic of Bulgaria NSI National Statistical Institute OP Operational Program PRO Producer Responsibility Organization RIEW Regional Inspectorates for Environment and Water RWM Regional Waste Management RWMA Regional Waste Management Association RWMC Regional Waste Management Center SR Spending Review VAT Value added tax WB World Bank WEEE Waste Electric and Electronic Equipment WMA Waste Management Act 5 Executive Summary 1. This study is an input to the second pilot Spending Review (SR) on Bulgaria. In 2016, the Government of Bulgaria (GoB) decided to initiate spending reviews to improve the efficiency and effectiveness of its spending in the context of a moderate fiscal consolidation process. Although Bulgaria has one of the lowest overall spending in the European Union (EU), spending outcomes lag those of other EU member states. In the case of waste management, Bulgaria spends the most among comparable EU countries, but outcomes could be significantly improved. Still a large part (48 percent in 20161) of municipal solid waste generated is landfilled even though waste management infrastructure is under development. 2. To help address these challenges the Ministry of Finance (MoF) requested analytical and advisory support from the World Bank. Such support was intended to identify spending pressures and potential efficiency and effectiveness gains in waste management. In contrast to most spending reviews, where saving targets are identified upfront and the primary objective is to find ways of reducing the budget, the primary objective of this review is to increase performance and use any savings derived from efficiency gains for additional priority spending on waste management. A secondary objective is for this SR to help increase the transparency of spending on waste management, as information on spending categories by activity and municipality has not been analyzed until now. The last objective is to inform forthcoming SRs produced by the GoB by creating awareness of different methodologies available for analysis of spending. Collaboration of the Working Group members, representing key stakeholders—Ministry of Environment and Water (MOEW), MOF, Enterprise for Management of Environment Activities (EMEPA), National Association of Municipalities in the Republic of Bulgaria (NAMRB), National Statistical Institute (NSI), Executive Environment Agency (EEA), and municipalities—has been crucial in providing information for the analysis and serving as a sounding board for preliminary findings and conclusions. 3. The findings are derived from methodologies that are based on assumptions and partial data, and thus need to be interpreted with caution. The timeline limited the depth of the analysis, and therefore, the report focuses on broad trends, noting interesting findings as well as unexpected findings. Understanding the underlying causes of these unexpected findings, as well as obtaining more specific recommendations would require additional analysis. It is hoped that this first attempt at understanding efficiency and effectiveness of waste management spending will motivate further analysis in the area. 4. Over the last decade, Bulgaria has invested significant resources in improving the municipal waste collection and treatment (recovery and disposal) facilities. Public spending has increased and services provided by municipalities improved, waste disposal improved by replacing small, barely controlled landfills with fully controlled regional waste landfills. The private sector has taken up its own responsibility via Producer Responsibility Organisations (PROs) and is active in the collection of packaging waste, Waste Electric and Electronic Equipment (WEEE), batteries etc., originating from households and institutions that generate similar waste. This spending review 1 NSI data. Eurostat data show a larger share of landfilled waste —64 percent of waste generated. 6 offers a quick snapshot analysis of spending based on country level data as well as data from 20 selected municipalities. The analysis reveals many differences in costs among municipalities, shows some inconsistencies and poses multiple questions as well as the need for further detailed investigations to arrive at conclusive results. 5. Despite these significant achievements, challenges remain to enhance the efficiency of the municipal waste management system to ensure that public money is indeed spent in the most efficient way and the effectiveness of the system to achieve the targets set in the legislation. Key Findings 6. Bulgaria allocates significant resources of its GDP on waste management. It spends the most compared to its regional peers both as percent of GDP and as a share of overall budget.2 Like its peers, Bulgaria has increased waste management spending over the last couple of years but while in regional comparators, the increase was due to higher investments, in Bulgaria current spending (personnel and operations and maintenance costs) contributed significantly to overall spending growth. The main cost drivers were waste collection & transportation and public area cleaning, mostly in municipalities that outsource waste management activities to the private sector. 7. There are large variations of spending across municipalities that need to be further analyzed. Such variations could be a sign of inefficiency. The largest variations are in smaller municipalities and municipalities that provide in-house services. Providing services in-house seems to be more expensive than outsourced services even though the private provider includes profit/risk margin and amortization when calculating costs. Larger municipalities tend to outsource activities and could share experience in managing better contracts with private providers. Comparing current spending per ton of generated waste has its limitations in terms of quality and coverage of data. To address some of these limitations a more detailed analysis is done based on detailed questionnaire for 20 municipalities. 8. The general finding of the spending review is that, based on the analysis of available information and data, cost reductions may be possible. While further, in-depth investigations are required, costs for collection & transportation and costs for public area cleaning seem to have significant room for optimization. In addition, separation at source could be improved, increasing the share of waste that is reused and recycled and allowing Bulgaria to reach set targets.3 Improving separation at source will also reduce the overall volumes of mixed waste which is currently serviced by municipalities. Key observations are presented below. 9. When benchmarked against calculated costs (i.e. would-be costs based on a professionally run system in line with international practice but with local unit prices), actual costs for collection/transportation and street cleaning are substantially higher; they are comparable for waste separation and somewhat lower for landfilling. Actual costs for in-house 2 Based on Eurostat data. It should be noted that countries do not follow unified data reporting when reporting their data to Eurostat therefore inter-country comparisons should be taken with some caution. 3 Targets for Bulgaria are primarily based on the targets set in the Waste Framework Directive (2008/98/EC), the Landfill Directive (1999/31/EC and the Packaging Directive 94/62/EC. Modifications of implementation dates are agreed between the EU and Bulgaria in the Act of Accession, April 2005. 7 collection & transportation are by 92 percent higher than calculated costs (BGN/ton 71 vs. BGN/ton 37) and 27 percent higher for outsourced service (BGN/ton 98 vs. BGN/ton 77). In the case of public area cleaning, benchmarking with EU member states show that public area cleaning cost per inhabitant in Bulgaria is close to the average cost in some old EU member states. Despite large differences in wage costs, which make up close to 60 percent of overall street cleaning costs in EU countries, average cost per inhabitant in Bulgaria is higher than the average cost in Belgium, the Netherlands, and England. 10. From the analysis of 20 municipalities it seems like that the largest gains in efficiency could be achieved in collection & transportation of waste and public area cleaning. Spending on these activities is close to ¾ of overall waste management spending. If spending was more efficient, municipalities in Bulgaria could achieve the same level of service with BGN 138 million less, or savings of close to 31 percent of current waste management spending. Municipalities providing in-house services could achieve savings of close to 41 percent of their current spending, or close to BGN 30 million. These estimates need to be further verified to ensure results from analysis of 20 municipalities are applicable for all municipalities in Bulgaria. 11. Despite popular belief, in-house collection & transportation activities do not appear to be more cost efficient than outsourced services, especially for smaller municipalities. Average costs per ton for the sample of municipalities for outsourced activities is by 29 percent higher compared to in-house services but there are considerable differences by group of municipalities and not all costs have been taken into account in the cost of in-house services.For smaller municipalities providing in-house services4, costs per ton are much higher than for outsourced services—by close to 30 percent for municiplaities with population of less than 50,000. Moreover, cost for in-house services does not include amortization and VAT is not levied on personnel spending while outsourced activities are subject to amortization and VAT on the total amount of the contract, including the wage and social contributions. This would mean that comparable costs for in-house services would be substantially higher as compared to outsourced services. 12. Revenues from municipal waste fees are intended to cover mostly operational costs except for outsourced services where amortisation is typically factored in the costs . To achieve financially sustainable in-house services, revenues must cover both operational and amortization costs which would however result in a substantial increase of cost per ton prices for in-house services. 13. Cost per ton for collection & transportation services increases with increase in size of municipality. This is in contradiction to international practices showing decrease of cost per ton with increase of waste quantities. 14. Based on data from the PROs received from MoEW it seems that the amounts of packaging materials put on the market as reported to MoEW by the PROs may be lower than the actual amount put on the market. Based on analysis utilizing the morphology of the mixed municipal solid waste, it appears that reported amounts could be as much as 30 percent 4 115 of municipalities out of 265 have a population of less than 50,000 inhabitants. 8 lower than actual. This anomaly needs to be investigated further. If indeed large amounts of packaging waste remain in the mixed waste, this burdens the municipalities as they finance the management of such waste through the mixed waste stream. 15. The majority of recycling materials are collected by the PROs who have the responsibility to finance the recovery of a set percentage of packaging materials placed on the market. The recycling rate of recyclables compared to the total amount of waste is approximately 10–15 percent while the recycling rate compared to the total amount of recyclables (i.e. recycling potential) is between 32–42 percent. According to existing legislation,5 at least 50 percent by weight of the waste from households needs to be recycled by 2020. It is therefore essential that separation at source improves significantly from current levels. 16. The effectiveness of separating recyclables from mixed municipal solid waste after collection is limited to 3–5 percent which is low, also compared with international practice. It should be noted that separation lines for mixed waste are not commonly used in the EU to increase recycling rates. 17. The lack of sufficiently detailed guidelines on reporting requirements for waste management spending and waste quantities constitutes a serious drawback and a limitation for the assessment of the efficiency and effectiveness of the waste management system in Bulgaria. At the national level, this is observed by differences in the statistical information available with different ministries and organizations (MoF, MoEW/EEA, NSI) and at municipal level it is displayed through inconsistent reporting of costs by municipalities. There is also lack of sufficient information and details related to the activities of PROs and RWMAs. Consequently, on certain instances as this paper reports, the available data show anomalies which are difficult to interpret and require further investigation. Key recommendations 18. Establish a uniform and transparent cost reporting system on municipal solid waste management services with clear guidelines for municipalities on cost items to be included in each waste management activity.6 These guidelines, planned to be finalized by March 2019, should be accompanied by capacity building for municipal staff for cost monitoring and reporting. 19. Initiate an in-depth analysis of actual costs of many municipalities with high costs for collection & transportation of waste and public area cleaning and benchmark them with municipalities having acceptable cost levels. The analysis could be useful in identifying the cost breakdown for each activity both for in-house and outsourced services; would allow better understanding of any errors of inclusion as well as errors of exclusion; and would facilitate the development of the guidelines. 20. Include in the guidelines a basic methodology for calculation of operational and amortization costs separately for individual services within the value chain: (i) waste 5 The rules and calculation methods for verifying compliance with the targets set in Article 11(2) of the Waste Framework Directive are laid down in Commission Decision 2011/753/EU. 6 See Annex D 9 collection and transport to facilities and treatment installations; (ii) treatment of waste in facilities and installations: separation services with associated recovery services of the recycled materials, RDF production and stabilization of biodegradables, etc.; composting including the associated separate collection costs; landfilling at a sanitary landfill; (iii) public area cleaning with description of the activities included. On basis of the cost calculations the tariff setting procedure must be decided including taxes (VAT, deductions, landfill fee), public area cleaning cost to be included, etc. Tariff invoicing to be based on the actual quantity of waste that represents the leading ground for determinig the extent of municipal waste fee, or on other grounds determined by the Municipal Council – for example, the number of persons in households pursuant to the provisions of art. 67, para 8 of the Local Taxes and Fees Act - for each type of service. 21. Review and to the extent possible eliminate differences in the statistical information available with different ministries and organizations, at municipal level as well as PROs and RWMAs need to be reviewed. This would greatly facilitate the process of comparing and analysing data from different sources that should be complementary, including data from each of the different treatment installations per RWMA. 22. Ensure waste management key performance indicators (KPI) are adequate and transparent. The planned information system of the EEA needs to be completed as soon as possible. Collecting and processing information in paper form reduces transparency and accuracy of information. Potential KPI could include—collected waste by municipality—overall quantity and per capita; share of landfilled waste by municipality; input and output of all fractions per treatment installation, share of recycled waste by municipality, progress in reaching the targets, etc. 23. Consider developing a dashboard with selected indicators by municipality to increase transparency and help municipalities learn from each other. Such indicators could include spending on waste collection & transportation per ton of collected waste, spending on public area cleaning per inhabitant, as well as some key performance indicators mentioned above (share of landfilled waste, progress in reaching the targets, etc.). 24. Consider introduction of legal obligation for municipal enterprises to prepare audited annual financial reports. This is expected to increase transparency of in-house waste management services of municipalities and could lead to efficiency gains. 25. Invest in tracking systems to improve surveillance of collection & transportation of municipal solid waste. There are cheap modern technologies that can be used to track planned routes of waste trucks, location accuracy of containers, fullness of containers, servicing of waste containers etc. Such technologies could improve efficiency and effectiveness of waste management services. 26. Draft a separate methodology to determine the morphological composition of the waste collected via the separate collection systems of the PROs. Both the methodology for the PROs and the Methodology for identification of morphological content of municipal waste will need to include specific method how to split the recyclables (packaging/ non-packaging) in the municipal waste stream. Proposed measures will lead to more precise calculation of the amount of packaging waste in municipal waste stream and could improve efficiency of spending of 10 municipalities for management of municipal solid waste (MSW). 27. Promote significant improvement of separation at source and separate collection by investing in public awareness. It is unlikely that the recycling rate can be increased with the present system of post collection separation of MSW and the separation at source via the PROs. 11 Introduction 28. This study is an input to the second pilot Spending Review (SR) on Bulgaria. In 2016, the Government of Bulgaria (GoB) decided to initiate spending reviews to improve the efficiency and effectiveness of its spending in the context of a moderate fiscal consolidation process. Though Bulgaria has one of the lowest overall spending in the European Union (EU), spending outcomes lag those of other EU member states. In the case of waste management, Bulgaria spends the most among comparable EU countries7 but outcomes could be significantly improved. Still, most of the waste collected by municipalities is landfilled despite significant investments in waste processing facilities. 29. The findings of the study are derived from methodologies that are based on assumptions and partial data, and thus need to be interpreted with caution. The timeline limited the depth of the analysis, and therefore, the report focuses on broad trends, noting interesting findings as well as unexpected findings. Understanding the underlying causes of these unexpected findings, as well as obtaining more specific recommendations would require additional analysis. It is hoped that this first attempt at understanding efficiency and effectiveness of waste management spending will motivate further analysis in the area. 30. This is the first study of municipal waste management spending and most of the analysis is based on data from 20 municipalities. To address issues related to availability and reliability of detailed information by municipality, the analysis is based on specially designed questionnaires that were filled in by 20 municipalities and the Operators of the Regional Waste Management Systems, accepting waste from these municipalities. The municipalities were selected by MOEW and MOF based on criteria such as size (4 groups according to population); participation in established integrated RWM systems, which are in operation; and participation in different regional waste management associations (15 associations are presented in this study). The questionnaires covered information on the organization of the waste management activities, amounts of municipal waste collected, separated and recyclables delivered for material recycling, produced RDF (if it is part of the system), produced compost and waste, destined for landfill disposal, and spending data by activity and economic classification. However, the reliability of all data provided could not be checked8 and therefore the results should be treated with some caution. 31. The objectives set by the GoB for this waste management spending report are threefold. First, to identify areas of efficiency gains within the existing budget envelope. Municipalities collect municipal waste fees to cover the cost of waste management activities but find it difficult to raise fees or improve markedly revenue collection and compliance given the still low incomes of the population. The second objective is to improve the transparency of waste management spending. Public information on costs of waste management activities and 7 Based on Eurostat data. It should be noted that countries may have difference in coverage of waste management activities and cross-country comparisons should be taken with some caution. 8 The team visited municipalities of Gabrovo, Levski, Plovdiv, and Veliko Tarnovo. Some of the information previously provided by municipalities was revised based on these visits. 12 comparisons across municipalities is difficult to find and comprehend by non-experts. The third objective is to inform GoB’s pilot SRs and, together with the SR Manual, create awareness of the methodologies available for the implementation of SRs in Bulgaria. This report is a first attempt at better understanding spending efficiency and effectiveness of municipal waste management in Bulgaria. In a limited amount of time and with the existing data limitations, it provides a first round of preliminary findings and identifies some areas where more detailed data and further analysis will be needed. 1. Key Challenges in Waste Management Spending 32. This section presents an overview of waste management spending in Bulgaria based on macro data from Eurostat, NSI, and MOF as well as data obtained from 20 municipalities . The analysis benchmarks Bulgaria with its regional comparators, looks at the spending patterns and composition of spending and benchmarks municipalities by groups of municipalities to identify potential spending pressures. It should be noted that the analysis and interpretation of collected data sets has been constrained by certain inconsistencies and data gaps. The key findings are presented below. High waste management spending 33. Bulgaria spends more on waste management compared to its regional peers reflecting high amount of waste generated.9 Between 2012 and 2016, Bulgaria spent on average 0.62 percent of GDP per year on waste management, the highest level of spending in the EU (Figure 1), and almost double the levels in Romania and the Baltic countries. While there might be differences in the coverage of waste management services across countries, it is worth exploring why Bulgaria’s public spending is so high. Bulgaria stands out also with its high quantities of generated waste per capita despite its low per capita income. Usually richer countries generate more waste per capita. Over the same period, Bulgaria generated on average 431 kg of waste per person per year while Romania only generated 252 kg per person and Poland 296 kg. Figure 1: Bulgaria spends more on waste management and generates more waste. Note: Waste management includes collection, treatment and disposal of waste. Source: Eurostat, COFOG data 9 Ibid. 13 34. Waste management in Bulgaria is an important expenditure item for general government and municipal budgets. Waste management spending makes up a significant share of general and local government spending in Bulgaria. In 2016, spending on waste management in Bulgaria accounted for 1.6 percent of general government spending, and for 7.9 percent of local government spending—the highest shares compared to regional comparators (Figure 2). Municipalities in Bulgaria are responsible for waste collection & transportation, treatment and public area cleaning. To provide these services, municipalities collect municipal waste fees. Figure 2: Waste management spending is an important spending item for general government and municipalities budgets. Source: Eurostat, COFOG data 35. Waste management spending has been on the rise in line with increasing revenues and financing from the EU. According to MOF data, municipal spending10 on waste management increased by close to BGN90 million between 2013 and 2016 (Figure 3). Municipalities charge citizens and firms for waste management activities and have recently improved collection of municipal waste fees (Figure 4). Revenues from fees, however, are not sufficient to cover all the investment needs of municipalities. Additional funds have been provided from the Operational Program (OP) Environment, financed by the EU, for building regional waste management systems and for recultivation of old landfill sites. The Government also supports municipalities for such investments, through the EMEPA. 10 Municipal expenditure reported by MOF (activity 625 and 627) do not include VAT paid on outsourced services and deductions under articles 60 and 64 of the Waste Management Act. 14 Figure 3: Waste management spending Figure 4: …in line with improved revenue has been on the rise collection Waste management revenue and expenditure, 2013-16 million BGN 553 490 504 513 510 423 430 444 2013 2014 2015 2016 Revenue from fees Expenditure Source: Ministry of Finance Note: Excludes Sofia City municipality Source: World Bank staff estimates based on data from questionnaires. 36. Collection and transportation of waste and public area cleaning contributed most to recent growth in waste management spending (Figure 5). Collection & transportation of waste accounted to close to 45 percent of waste management spending in 2016 and grew by 10 percent compared to 2015, driving overall growth in waste management spending of municipalities. Public area cleaning (sweeping of streets, parks, cleaning of snow, and washing of streets) represents 1/3 of total waste management spending, and experienced a growth of about 7 percent per year in 2016. Only spending on waste treatment (separation, recovery and landfilling) declined in 2016 because of declining investments in waste management infrastructure financed with EU funds. In the absence of significant investments in infrastructure in 2016, the share of spending on waste treatment is declining at the expense of spending on waste collection & transportation and public area cleaning. Figure 5: Collection of waste and public area cleaning drive growth of waste management spending Source: World Bank staff estimates based on NSI data and data from questionnaires. 15 37. Significant share of waste management activities are outsourced with up to BGN 420 million paid to private companies. 145 municipalities outsourced collection and transportation of waste in 2016 and account for the bulk of overall spending on waste management. Usually municipalities that outsource collection and transportation, outsource also other waste management activities such as separation and treatment of waste, and public area cleaning. Some of the largest municipalities that outsource services also have in-house activities but since detailed breakdown is not available, all their activities are considered outsourced for the purposes of this analysis. If there were no changes in the organization of services provided,11 municipalities that outsource activities increased their total spending by 14.9 percent (Figure 6) in 2016 compared to 2015. Municipalities providing in-house services are usually smaller municipalities with population of less than 150,000. Despite their large number (120), their spending represents only 18 percent of overall waste management spending. Figure 6: Recent growth in total spending was driven by municipalities that outsource collection and transportation of waste in large municipalities Source: World Bank staff calculations based on MoF data Efficiency of spending appears low 38. Municipalities providing in-house collection and transportation services seem to spend more per ton of generated waste than municipalities outsourcing activities. The cost of providing in-house services appears higher on average and for all groups of municipalities (Figure 7) even though the private providers include profit and amortization in their costs. For instance, the weighted average of the current spending per ton for in-house services is by 28 percent higher than for outsourced services. This difference is much larger for municipalities with population between 15,000 and 50,000 where municipalities providing in-house services pay on average 50 percent more than their peers that outsource services. However, some municipalities consider outsourcing to be costlier compared to in-house services and try to expand in-house activities (for municipalities providing both outsourced and in-house activities) or shift entirely to in-house provision. At aggregate level and based on the existing data, there is no evidence that shifting to 11 Some municipalities might have shifted to providing in-house services but the information on organization of serve provision is only for 2016. 16 in-house services leads to savings. Section 2 provides comparison of unit costs based on more detailed data for 20 municipalities. Figure 7: Current spending per ton of municipalities that provide services in-house appears higher than in municipalities outsourcing waste management services Source: World Bank staff estimates based on MOF and NSI data. Note: Data refer to 2016. The estimates of outsourced activities exclude VAT. 39. There are large variations in current spending per ton of generated waste, especially in the smallest municipalities. Large variations in spending per ton across municipalities can be an indication of inefficient use of resources or may reflect unreliable spending or waste data. As shown in Figure 8, the variation of current spending12 per ton of generated waste is very high across all groups of municipalities. The highest variation, however, is observed in the smallest municipalities with less than 15,000 inhabitants. For example, spending per ton in these municipalities varies between BGN20 and BGN690 per ton. Such high variations will need to be explored in more details to understand if spending is sufficient to provide adequate service (for municipalities with the low-cost levels), if there is room for efficiency gains (for municipalities with high cost levels), and if there is an issue with data reliability (underreporting of spending or of generated waste). Understanding the factors affecting the cost differences would require a more in-depth analysis, decomposing spending by type of activities and estimating unit costs based on amounts of waste collected by municipalities. Such analysis is presented in Section 3 based on detailed data received from 20 municipalities. 40. Variations in larger municipalities, albeit smaller, are also worth exploring as these municipalities contributed most to waste management spending growth. Current spending per ton in municipalities with population between 15,000 to 50,000 was between BGN53 in Omurtag to BGN557 in Radomir. In the other two groups of municipalities variations were smaller—from BGN100 to less than BGN300. Nevertheless, comparisons between municipalities can provide useful lessons. For example, Burgas with an estimated unit cost of BGN 263/ton could learn from Varna (BGN 121/ton) how to reduce by half its current spending per ton as these two cities have similar characteristics in terms of size of population and inflows of tourists. 12 To eliminate the impact of significant fluctuations in capital spending, only current spending is taken into account. 17 Figure 8: There are large variations in current spending per ton of generated waste by group of municipalities Source: World Bank staff calculations using data from MOF and NSI 18 41. It should be noted that estimated spending per ton of generated waste is indicative and has two major limitations. First, the spending includes also spending on public area cleaning which is not associated with amounts of waste generated. Second, generated waste reported by NSI includes waste collected not only by municipalities but also waste collected by PROs and companies collecting recyclables. The EEA is responsible for gathering detailed information on flows of waste by municipality but the data is not readily available. Despite these limitations, unit costs shown in this section provide an indication of potential outliers. 42. Comparison of waste management unit costs for all 265 municipalities in the future should be based on information by municipality on spending per type of activity and amounts of waste collected by municipalities and delivered for waste treatment to Regional Waste Management Centers (RWMCs). Provided such breakdown is available, a data envelopment analysis13 could be considered to compare spending and performance of all municipalities.The NSI collects information from all municipalities on the spending per type of activity but wage spending is shown separately instead of being allocated to the three types of activities—collection, treatment, and public cleaning. This information is not publicly available, neither in aggregate amounts or by municipalities, even though municipalities use similar breakdown of activities when justifying the rate of the waste fee. The EEA collects detailed information from municipalities but the data is provided in paper form and summary tables in easy to understand format—by the users of waste management services (citizens and firms) and decision makers alike—are not publicly available. Municipalities are also obliged by law to publish the justification for the proposed setting of the waste fee, detailing planned spending per type of activity and reporting of actual spending. However, the information is provided in different formats and breakdowns and in most cases is difficult to find on the municipalities websites. Effectiveness of waste management spending could be improved 43. Significant investments were made in Bulgaria in building regional waste management systems but the share of landfilled waste remains high. Nearly BGN720 million14 were invested between 2007 and 2015 in building modern pre-treatment facilities , including separation, recovery, composting and landgfilling, which serve the municipalities participating in the corresponding regional waste management associations (RWMAs) (Figure 9). These investments were used to support 26 RWMAs, covering 120 municipalities. The rest of municipalities would receive financing from the new OP Environment 2014-2020. Bulgaria still landfills 48 percent of the generated waste in 201615 and the analysis in section 4 shows that the effectiveness of separation and recycling is low. 13 The data envelopment analysis examines efficiency by comparing outputs with inputs. Such analysis was performed for the Spending Review on Policing and Firefighting (World Bank, 2018). 14 EU financing, national financing and financing from beneficiary. 15 Eurostat data show a larger share of landfilled waste—64 percent of waste generated in 2016. 19 Figure 9: Despite significant investments in Figure 10: …the share of landfilled waste building regional waste management remains significant, albeit falling systems Source: Information System for Management and Source: NSI Monitoring of EU funds (ISUN) 2. Efficiency of waste management spending General 44. Brief description of the organization of the waste management system in Bulgaria . The common waste collection system consists of a bring system using various capacity containers for mixed municipal waste combined with bring systems for recyclables. The mixed waste system is the responsibility of municipalities while PROs are fully responsible for separate collection of packaging waste and the financing of all its costs to meet the take back and recycling requirements under the Extended Producer Responsibility (EPR) legislation. Bulgaria has around 55 regional landfills under the management of RWMAs. In 2016, 49 percent of the mixed municipal waste is transported to separation lines at RWMA’s, close to 3 percent are recyclables from municipal solid waste delivered for recycling, and 48 percent is transported directly to a regional sanitary landfill owned by the municipalities which are members of the corresponding RWMA. The RWMCs separate plastics, paper and cardboard, glass and metals, and produce compost from green waste. There are several RWMCs producing Refuse Derived Fuel (RDF) which is then delivered for incineration with energy recovery to cement plants. In some of the RWMCs biodegradable waste is stabilized and as a result a compost-like output (CLO) is produced, part of which is used for covering of landfills. 45. Availability and reliability of statistical information limits the depth of the analysis and could affect the findings. There is lack of uniform and transparent information on spending both at national and municipal level by type of waste management services. In the process of preparing this report, some inconsistencies were detected in statistical information by different ministries/organizations (MOF, MoEW, EEA, NSI). For example, NSI reports a quantity of waste delivered to separation lines of 1,42 million tons in 2016 where EEA reports a quantity of 1,15 million tons. Data reported by Regional Inspectorates for Environment and Water (RIEW) on landfilled waste by municipality show substantial differences with data reported by NSI and by 20 municipalities. 20 46. To address the issues related to availability of information, the analysis is based on specially designed questionnaires that were filled in by 20 municipalities and the Operators of the Regional Waste Management Systems, accepting waste from these municipalities. The municipalities were selected by MOEW and MOF based on criteria such as size (4 groups according to population); participation in established integrated regional waste management systems, which are in operation; and participation in RWMAs (15 associations are presented in this study). The questionnaires covered information on the organization of the waste management activities, amounts of municipal waste collected, separated and recyclables delivered for material recycling, produced RDF (if it is part of the system), produced compost and waste, destined for landfill disposal, and spending data by activity and economic classification. However, the reliability of all data provided could not be checked16 and therefore the results should be treated with some caution. The efficiency assessment carried out in this report is based on an analysis of the actual cost/ton or cost/inhabitant in case of public area cleaning for the various waste management activities and the identification of possible lower cost for the same services. The assessment is based on information provided by 20 municipalities (by means of completed questionnaires for year 2016). The 20 municipalities represent 40 percent of the total population and 33 percent of total waste collected. 47. Actual cost/ton used in this analysis follow established municipal practice. Municipalities report on cash basis for four main activities i.e. (i) containers/bins; (ii) collection and transport, (iii) treatment including separation, recovery, composting, and landfilling; and (iv) public area cleaning. It is not understood why municipalities must report separately on investments on containers, while the investments in vehicles are included in the “collection and transportation� activity. The total costs per activity include personnel costs, operations and maintenance costs as well as: • Investments and thus cost/ton can vary per year • VAT paid by municipality (“reverse charge� system). VAT for in-house services is only on purchases and not on wages but full VAT payment is applied on outsourced services. As a result, the overall VAT costs to be added for in-house services is lower than for outsourced services • Additions such as costs for closure of landfills and fee for every ton of waste disposed into landfill (art. 60 and 64 of WMA) • Amortization and margin to cover profit/risks on outsourced services and no amortization on in-house services. 48. Estimated costs, i.e. would-be costs based on a professionally run system in line with international practice but governed by local legislation requirements and with local unit prices, are presented below for the individual segments of the value chain, i.e. collection & transportation, separation, landfilling and street sweeping. Annex E presents a full summary of the actual and the estimated costs based on the prevailing situation: 16 The team visited municipalities of Gabrovo, Levski, Plovdiv, and Veliko Tarnovo. Some of the information previously provided by municipalities was revised based on these visits. 21 - 20 municipalities: In-house or outsourced services for collection and public area cleaning while separation and landfilling services are subcontracted to a private company operating the facilities owned by the municipalities. In-house services are without amortization and at lower VAT cost (no VAT on wages) while outsourced services are subject to full VAT charge, amortization and a margin for profit/risk. No VAT is applicable on street cleaning services. Box 1: Basic principles of efficiency assessment Waste is defined as Municipal Solid Waste generated by households and similar type of waste from commercial, institutional and industrial entities and street cleaning waste. Efficiency is defined as assessment of the actual operational cost/ton for WM services and the possibility to provide same services for a lower cost. The assessment is based on following approach: 1. Information is used given in questionnaires filled in by 20 municipalities representing 40 percent of population and 33 percent of total generated municipal solid waste. 2. In addition, information from national organisations such as the NSI and the EEA under MOEW is used. 3. Information on amounts of packaging waste collected and recycled are received from MOEW. 4. Information on amounts of recyclables (plastics, paper, glass and metals) collected and recycled by the municipalities (or via their RWMCs) is taken from the questionnaires filled in by 20 municipalities. 5. Total costs for each waste management activity (collection & transportation of waste, waste treatment (separation, recovery, and landfilling) and public area cleaning) are used as reported by Municipalities being a mix of investment costs and operational costs excluding amortization. 6. Total costs are corrected by deducting (i) investment expenditures and (ii) costs under art. 60 and 64 of WMA (landfill closure and fee for every ton of waste disposed into landfill) as far as reported. It is assumed that total costs include VAT paid by municipalities for in-house and outsourced services whereby municipalities do not pay VAT on wages (estimated at 40 percent of operational costs). 7. Actual cost/ton is analysed using the corrected total costs and the quantities collected and delivered to the RWMC as reported by the municipalities. 8. The actual costs/ton are compared with own estimated cost/ton or cost/inhabitant for each activity i.e. collection & transportation, waste treatment (separation, recovery, and landfilling) of mixed waste and public area cleaning. Waste collection & transportation Actual operational costs 49. Analysis of actual costs of 20 municipalities (Annex A-1) suggest that the larger the municipality the higher the cost of collection and transportation (Figure 11). By contrast, international practices show economies of scale where costs per ton decrease with the increase of waste quantities. All large municipalities in the sample outsource collection and transportation of waste but some municipalities provide also in-house services. Plovdiv municipality, where the collection & transportation cost is one of the lowest among the group of large municipalities, hires in collection trucks while collection of waste is performed by staff employed by the municipality. 50. There is a great variation of costs per ton among individual municipalities. The largest variation of unit costs is observed among the smallest municipalities (Figure 12) in the first two groups—municipalities with population below 15,000 and municipalities with population between 15,000 and 50,000. These variations could be due to differences in distance to disposal area, frequency of collection, urbanization degree, organization of the work (if the service is provided in-house or outsourced). In most of the smallest municipalities, collection & transportation of 22 waste is provided by the municipality—either directly or by a municipal enterprise. Larger municipalities tend to outsource such services. Figure 11: In contrast to international Figure 12: Variation of cost/ton per experience, largest municipalities pay the most municipality is high per ton of collected waste Source: World Bank staff estimates based on data from Source: World Bank staff estimates based on data questionnaires from questionnaires 51. Despite popular belief, in-house activities do not appear to be more cost efficient, especially for smaller municipalities. Average cost/ton for outsourced services is almost twice the cost of in-house services (Table 1), but there are significant differences by group of municipalities and reporting of costs. For smaller municipalities (with population of less than 50,000) in-house services are much more expensive while for larger municipalities it is the opposite. Only three out of ten larger municipalities, however, provide in-house services (Vidin, Gabrovo, and Plovdiv). In addition, the cost of in-house services for all municipalities excludes amortization and is subject to lower VAT costs as there is not VAT on personnel cost for in-house services. Including VAT and amortization in in-house service costs would mean that comparable costs for in-house services would be substantially higher as compared to outsourced services, especially for municiplaities with population of less than 150,000 inhabitants. In-house and outsourced services are about 50-50 percent quantity-wise and 12-88 percent cost-wise in the sample of 20 municipalities. The total costs for collection & transportation is corrected for any investment as far as reported. Table 1: Actual Collection & Transportation Costs per Ton of Collected Waste, 2016 (BGN/ton) Municipal size Average In-house¹ Outsourced <15,000 61.6 78.9 42.0 15,000-50,000 96.7 127.2 88.3 50,000-150,000 79.3 62.4 87.2 >150,000 122.7 71,0 134.6 Total 117.0 65.5 128.8 Notes: ¹ Excluding amortization and margin for profit/risk; subject to lower VAT costs. See Annex A-1 Source: World Bank staff estimates based on data from questionnaires. 23 Estimated costs 52. Analysis of estimated costs (Table 2) is based on international practices and considering the cost level and legislation in Bulgaria. Benchmarking with costs in other EU countries or countries in the region might be misleading as it will very much depend on the design of the collection system (bring system versus kerbside collection, frequency of collection, urbanization degree, distance to disposal area, salary level, etc.). Therefore, cost estimates are made based on international practises and considering the cost level (of inputs such as energy and wages) and legislation (applicable VAT regime). (Annex A-2) Table 2: Estimated Collection Costs per Ton of Collected Waste, 2016 (BGN/ton) Inhabitants Outsourced (BGN/ton)¹ In-house (BGN/ton) OPEX² CAPEX³ Total OPEX² CAPEX³ Total Up to 30,000 57.22 40.41 97.64 48.55 36.74 85.29 Up to 60,000 45.26 36.29 81.55 38.41 32.99 71.40 Up to 150,000 41.81 32.17 73.99 35.48 29.25 64.73 Average 43.27 33.4 76.68 36.72 30.37 67.09 Notes: ¹ Including margin for profit/risk. All amounts including VAT. Source: Annex A-2; ² OPEX means operational costs; ³ CAPEX is amortization costs considering depreciation and interest. Source: World Bank staff estimates based on data from questionnaires. 53. Comparison of actual and estimated costs shows that in-house services (Figure 13) spend per ton almost double the estimated cost per ton. The second group of municipalities (with population between 15,000 and 50,000) appears to be an outlier. However, the significant difference could reflect longer distance to RWMC as Levski and Pavlikeni municipalities fall within this group and transport their waste to Nikopol (the distance is more than 60 km). The estimated cost of in-house services includes only operational costs (OPEX) as no amortization is accrued. 24 54. Differences between actual and estimated costs, albeit significant, are less pronounced for outsourced services (Figure 14). Actual costs for all municipalities in the sample that outsource services are by 67 percent higher than estimated costs, mostly on the account of significant differences in large municipalities. Estimated costs for municipalities in the first two groups (with population below 50,000) appear lower than the actuals. These results, however, could be affected by deficiencies in reported amounts of waste as some of these municipalities are outliers in terms of waste per capita per year. For larger municipalities (above 50,000 population) actual costs of Varna and Pernik are meeting the estimated cost levels. Figure 13: Actual costs of in-house services Figure 14: Actual costs of outsourced are almost double the estimated costs activities are by 67 percent higher than estimated costs Source: World Bank staff estimates based on data from Source: World Bank staff estimates based on data from questionnaires questionnaires Waste separation Actual operational costs 55. The separation operations at the RWMA are generally outsourced realizing about 82,500 tons of plastics and paper/cardboard. This would be 7 percent of the input (according to EEA). Data from the municipal questionnaires however show that no more than 3 – 5 percent of the waste are separated recyclables (Error! Reference source not found.). The discrepancy b etween the EEA data and the data from the questionnaires remains unexplained. 56. A gate fee is charged by the private operator for separation services including all operational costs such as costs for wages, maintenance and repair, energy and transport to landfill but excluding amortization and VAT. No amortization costs are considered as the municipalities- members of the RWMA are the owners of the facilities. 57. The weighted average gate fee is BGN 23/ton excluding VAT (Annex B-1). The separation costs in Sofia are BGN 32.20/ton excluding VAT but it includes biodegradable waste stabilisation and RDF production. This gate fee is based on a minimum reduction by weight of 20- 25 percent of landfilled waste subject to landfill fee. In case this target is not realized, the gate fee 25 will be lower in the following year. Landfill reduction is realized through separation of recyclables, loss of humidity during waste stabilisation treatment and production of compost-like output for waste covering. Figure 15: Gate fees for separation vary Note: Excluding VAT Source: World Bank staff estimates based on data from questionnaires. Estimated cost 58. Most operations of separation lines are outsourced to private companies while the municipalities being member of the RWMA are generally the owner of the facilities. The private company is responsible for all direct operational costs such as maintenance and repair, energy consumption, etc. For benchmarking purposes own estimates have been prepared for a 15t/h line operating 10hrs/day during 312 days/year (Annex B-2). The results are summarized in the table below: Table 3: Estimated Separation Costs per Ton of Separated Waste, BGN/ton OPEX¹ CAPEX² Total Estimated 18.5 10.8 29.3 ¹ Excluding VAT and margin for profit/risk; ² CAPEX is amortization Source: World Bank staff estimates based on data from questionnaires. Table 4: Comparison of Actual and Estimated Waste Separation Costs, BGN/ton Actual cost1 Estimated cost² Average cost of waste separation (based on 23.3 21.3 data for 7 municipalities) ¹ Covers only operational expenses, including profit/risk margin; ² Includes risk margin of 15 percent. Source: World Bank staff estimates based on data from questionnaires. 59. Actual separation costs are in line with the estimated costs. Estimated operational costs (OPEX) including margin for profit/risk would average BGN 21.3/ton (risk margin of 15 percent as gate fee will depend on separation percentage). 26 Waste landfilling Actual Operational Cost 60. Landfills at RWMCs are normally operated by the private company also operating the separation line. The landfill is owned by the municipality on the territory of which the landfill is located. The gate fee for landfilling is related to the expected quantities and thus the size of the cell in exploitation. The weighted average of actual gate fees has been estimated at BGN 19.8/ton excluding VAT and amortization (Annex B-1). In addition to the gate fee, a deduction under art. 60 of WMA (depending on the size of the landfill) is applied for closing and monitoring of landfills, and deductions under art.64 of WMA—for every ton of waste disposed into a landfill (BGN 36/ton in 2016)17. No gate fee nor deduction is paid for waste covering materials such as stabilised material from the separation line. Figure 16: Actual gate fees for landfilling costs are broadly comparable across municipalities Source: World Bank staff estimates based on data from questionnaires. Estimated cost 61. The actual gate fees are lower than the estimated costs. This might result in deterioration of the landfill into a sub-standard facility (low compaction by trying to save on fuel, no adequate waste covering, insufficient leachate treatment, no adequate maintenance, etc.). Most landfill operations are outsourced to the same company operating the separation line and, in some cases, a municipal enterprise might operate the landfill. For benchmarking purposes own cost estimates are prepared (Annex B-3) resulting in BGN 24/ton including 10 percent margin for profit/risk and excluding VAT as compared with the actual gate fee of BGN 19.8/ton excluding VAT. Table 5: Comparison of Actual and Estimated Waste Separation Costs, BGN/ton Actual cost1 Estimated cost Average cost of landfilling waste 19.8 24.0 Note: ¹ Covers only operational expenses, including VAT and profit/risk margin; Source: World Bank staff estimates based on data from questionnaires. 17 The deductions are growing gradually each year and the level set for 2020 is BGN 95/ton. 27 Waste composting Actual operational cost 62. Composting infrastructure in Bulgaria is under development. Composting facilities are constructed at RWMCs based on aerobic or anaerobic technologies. The composting facilities are mainly used for pre-separated “green waste� coming from park maintenance as separate collection of organic waste from households is in its infancy although Sofia municipality is also reporting on food waste to be delivered for anaerobic digestion. The total national annual quantity of biowaste in 2016 is reported by EEA at 109,926 tons although only 5 out of 20 municipalities are reporting on costs for composting. No costs are reported for green waste collection and transport while the annual costs reported for composting are between BGN 20,000-30,000 per municipality. No information is available on type, number and investment costs for composting installations in the 20 municipalities. Therefore, further analysis on the efficiency and effectiveness of composting could not be carried out. Public area cleaning Actual Operational Cost 63. Public area cleaning spending is an important spending activity for municipalities. Municipalities include costs for provision of litterbins and its emptying, sweeping and washing of streets, cleaning of municipal roads, graffiti cleaning, weed cleaning, cleaning illegal dumps, summer (sweeping and washing) and winter cleaning of streets and parks in urban areas, cleaning of municipal roads and other activities. Public area cleaning spending could include also some expenses related to park or road maintenance that need to be classified under other government functions but municipalities find it difficult to distinguish always costs pertaining to waste management only. Detailed guidelines for correct classification of expenses under public area cleaning is key as these expenses are used for the calculation of the waste fee. 64. As expected, actual public area cleaning cost per inhabitant (Annex C-1) tends to be higher for larger urban municipalities although there is high variation of unit costs in these municipalities. Large urban municipalities tend to provide more services to its citizens, labor costs are higher in cities, demand for higher quality services is greater requiring higher frequency of services. High variation of unit costs in larger municipalities needs to be further analyzed as it might signal inefficiencies. Some municipalities include costs for activities that are not related to waste management such as development, repairs, snow cleaning, disinfection, landscaping, etc., that unlawfully increses services costs. 28 Figure 17: Actual public area cleaning costs are highest for largest urban municipalities Actual public area cleaning cost per capita, BGN 60 50 40 30 20 10 0 Septemvri Elena Burgas Stara Zagora Pavlikeni Bratia Daskolovi Pernik Dolna Mitropolia Levski Sofia Krushari Plovdiv Varna Dolna Banya Aksakovo Gabrovo Shabla V.Tarnovo Vidin Haskovo pop<=15k 15k=150k Source: World Bank staff estimates based on data from questionnaires. 65. Actual cost per inhabitant for public area cleaning for in-house services appears lower than for outsourced services, although the results vary according to the size of municipality (Table 6). Cost/inhabitant for in-house services is by 13 percent lower than for outsourced services but the private provider includes profit and VAT in the cost of contracted services. Most of the smallest municipalities provide the cleaning services in-house while most of large municipalities (with population of more than 50,000) outsource all or part of these services. Municipalities believe that provision of in-house services is more efficient as the service cost does not include VAT and profit margin. Some large municipalities, such as Veliko Tarnovo, have started to increase the share of in-house services with the aim of reducing costs and increasing effectiveness. Available data does not provide evidence however for such gains so far. The low outsourced cost/inhabitant must be taken with some caution as it is based on a limited number of municipalities. Cost breakdown of the reported total costs is lacking and therefore no detailed assessment could be made of the efficiency. Table 6: Actual Cleaning costs (BGN/inhabitant) Municipal size Average In-house Outsourced < 15,000 6.73 7.16 5.38 15-50,000 7.70 6.37 8.70 50-150,000 24.29 16.35 27.53 >150,000 37.87 41.08 37.34 Total 34.53 30.95 35.46 Note: For more details Annex C-1 Source: World Bank staff estimates based on data from questionnaires. Estimated costs 66. Analysis of estimated costs (Annex C-2) show that on average they are by 22 percent 29 lower than actual costs. The differential between actual and estimated costs is higher for in-house services (Table 7). The estimated cost per person does not take into account differences in the scope and quality of services covered. Table 7: Comparison of Actual and Estimated Public Area Cleaning Costs, BGN/inhabitant Actual cost Estimated cost In-house services 30.95 20.38 Outsourced 35.46 29.64 Average cost 34.53 26.79 Source: World Bank staff estimates based on data from questionnaires and own estimates. 67. Public area cleaning cost per inhabitant in Bulgaria is close to the average cost in some old EU member states. Despite large differences in wage costs, which make up close to 60 percent of overall cleaning costs in EU countries, average cost per inhabitant in Bulgaria of EUR 18 is higher than the average cost in Belgium, the Netherlands, and England (Table 8). Differences in cost levels depend on the service level such as frequency of cleaning, mechanisation, in-house or outsourced services and on tourist flows. Experience in some EU member states shows that about 75 percent of total public area cleaning costs is for cleaning operations (with 60 percent personnel costs), 20 percent for materials such as litterbins, 5 percent for transport, treatment and communications/ PA raising. It will be important to analyze in detail the cost structure of public cleaning in Bulgaria to understand where the largest inefficiencies are. More automation of processes, including of monitoring of contract implementation of services could offer efficiency gains and make room for improvements in effectiveness. Table 8: Average public area cleaning cost in European countries Country Euro/inhabitant Spain 54 Wales 41 Denmark/Sweden/France 40 Germany 33 N-Ireland 29 Switzerland 22 Bulgaria 18 England 14 Netherlands 12 Belgium 10 Source: Clean Europe Network and World Bank staff estimates based on survey of 20 municipalities for Bulgaria. Total operational costs 68. Comparison between actual and estimated costs suggests that nearly 31.2 percent of the actual spending of the 20 municipalities could potentially be saved. The largest savings could be achieved in collection & transportation of waste and in public area cleaning. Municipalities providing in-house services could achieve savings of close to 49 percent in collection & transportation of waste and about 34 percent in public area cleaning. Actual costs for separation with recovery operations and landfilling are in line with estimated costs. 30 Table 9: Difference between actual and estimated spending for the sample of 20 municipalities In-house Outsourced Total million BGN Collection & transportation 6.8 40.7 47.5 Public area cleaning 5.7 13.9 19.6 Total 12.5 54.6 67.1 percent of total Collection & transportation 48.5 41.5 42.4 Public area cleaning 34.1 16.1 19.0 Total 40.7 29.6 31.2 Note: Estimated spending is based on estimated unit costs and waste collected for collection & transportation and number of population for public area cleaning. Source: World Bank staff estimates based on data from questionnaires and own estimates. 69. Provided that similar savings could be achieved for all municipalities, total savings could reach BGN 138 million. If savings as percent of actual spending would be applicable for all other municipalities, BGN 30 million could potentially be saved from in-house services and BGN 108 million from outsourced services. These estimates should be treated with caution because unit costs are based on a limited number of municipalities (20) that may not be representative for all municipalities. The selection of the sample of municipalities is tilted to municipalities participating in RWMAs which affects overall waste management spending. There are also difference in coverage of waste management activities and cost items between data provided by 20 municipalities and MOF data. MOF spending data includes also spending on separation and landfilling and exclude VAT paid on outsourced activities and deductions under articles 60 and 64 of WMA. Table 10: Difference between actual and estimated spending for all municipalities In-house Outsourced Total Actual current spending, BGN million 73.1 365.8 438.9 Estimated saving, million BGN 29.7 108.2 137.9 Estimated saving, percent of actual current spending 40.7 29.6 31.4 Source: World Bank staff estimates based on MOF data and own estimates. 3. Effectiveness of waste management General 70. Effectiveness is defined as the extent to which the applied technologies and methodologies contribute to achieving the targets set in the legislation on re-use of recyclables. The targets set in the Waste Framework Directive (2008/98/EC), the Packaging Directive 94/62/EC and the Landfill Directive (1999/31/EC) with derogations for implementation dates as agreed in the Accession treaty need to be calculated according to one of the four methods prescribed in EU commission decision 2011/753/EU. 31 71. The most recently adopted (May 2018) EU rules envisage further economic incentives towards prevention of waste, packaging optimization, reuse and recycling (Table 11). In addition, hazardous household waste will have to be collected separately by 2022, bio-waste by 2023 and textiles by 2025. By 2035 the amount of municipal waste landfilled must be reduced to 10 percent or less of the total amount of municipal waste generated. Table 11: New recycling targets for packaging waste By 2025 By 2030 All packaging 65% 70% Plastic 50% 55% Wood 25% 30% Ferrous metals 70% 80% Aluminium 50% 60% Glass 70% 75% Paper and cardboard 75% 85% Source: European Commission 72. The analysis of effectiveness of waste management carried out focusses on waste collection, separation and (pre)treatment. Due to data limitations, analysis of public area cleaning was not performed. The analysis is based on data received from 20 municipalities and information during follow-up visits to selected municipalities as well as national data from NSI, MOEW, and EEA. 73. In Bulgaria, municipalities are generally responsible for mixed waste collection, transportation, treatment and disposal whereas PROs have the responsibilities related to separated at source dry packaging materials (recyclables) under the Extended Producer Responsibility obligations set in national legislation (see Box 2). 32 Box 2: Extended Producer Responsibility Extended Producer Responsibility (EPR) is an efficient resource management tool whereby producers take over the responsibility for the end of life management of their used products. This can include collection, sorting and treating these for their recycling and recovery. Its basic feature is that actors across the packaging value chain (manufacturers, importers and retailers) assume a significant degree of responsibility for the environmental impact of their products throughout their life-cycle. This includes products’ ‘upstream’ impact linked to the selection of materials, product design and production processes as such, as well as ‘downstream’ impact relating to the products’ use and disposal. In so doing, producers accept their responsibility when designing their products so as to minimise their life-cycle environmental impact. They thereby assume legal and economic liability for their products’ environmental impact, starting from the design phase. Through EPR, Member States also share public service responsibilities with private companies, which have to assume these themselves. The policy first appeared in the early 1990s in a few European Member States, especially for packaging waste, and has later on expanded across the EU and beyond. Since then, EPR has contributed to significant increases in recycling rates and public spending savings on waste management, and helped decouple waste management from economic growth. The general requirements for the waste management in EU are established through the Waste Framework Directive that allows EU Member States to set up EPR schemes in which the producers and importers jointly manage the responsibilities assigned to them in the directives. The majority of EU countries decided to set up EPR schemes for packaging waste (25 out of 28) and only three Member States (Croatia, Denmark, Hungary) implemented ministerial or public fund managed schemes where the obliged industry is paying a tax to the state budget or environmental fund and then the revenues generated are used to support the separate collection and sorting organized by the local authorities. The EU legislation allows for a great level of flexibility on the approaches to implement EPR to be defined in the specific national legislation. The implementation of EPR is linked to the different policy instruments used by the national authorities. These include setting up recycling and recovery targets and take back requirements for the used products or packaging, taxes on the products placed on the market, obligations for labelling of product and providing information to consumers about the material content, separate collection patterns and recycling. The selected models can vary between the countries and the concerned product groups depending on the political objectives and the specific legal, economic, social and technical conditions and constraints. Waste collection and pre-treatment by municipalities 74. The effectiveness of post collection waste separation is low as evident from the low share of waste delivered for recycling by municipalities. Municipalities submit for preliminary treatment 49 percent of municipal waste to the sites of the RWMAs (Table 12) where the waste is further processed in treatment installations such as separation, shredding and sieving. Part of this waste is send for recycling, part is bio-stabilised and landfilled, part is processed into RDF. Municipalities deliver for recycling only approximately 3 percent of generated municipal waste. This low recovery rate is confirmed by the data from 20 municipalities (Error! Reference source n ot found.). 75. International experience suggests that sending waste for recycling cannot be 33 improved via post collection separation. Even with more sophisticated equipment and automation, higher recovery rates are unlikely as long as biodegradable waste is in the mixed waste. It may even be expected that the recovery rate of such installations will drop further if the effectiveness of the collection system of the PROs and possibly complemented with other, municipal separate collection systems improves. Table 12: Waste Generation and Treatment, 2016 Ton Percent Total generated municipal waste 2,881,330 100 Landfilled municipal waste 1,383,005 48 Submitted for preliminary treatment* 1,417,702 49 Delivered for recycling municipal waste** 80,623 3 * Submitted for preliminary treatment includes waste brought to the sites of the RWMCs where the waste is further processed in treatment installations such as separation, shredding and sieving. Part of this waste is sent for recycling, part is bio-stabilised and landfilled, part is processed into RDF. ** Delivered for recycling municipal waste is understood as separately collected municipal waste. To validate the amount of waste delivered for recycling, the data from the questionnaires that were send to the municipalities is used. Source: NSI Table 13: Amounts of municipal waste collected and recovered only18 by municipalities in newly established RWMCs, 2016 Municipality Collected separated separated separated separated separated submitted Recovery solid paper plastic glass metals wood for rate waste recycling Ton percent Aksakovo 8,933 8 2 6 0 0 15 0.2% Bratia Daskalovi 2,391 0.0% Burgas 63,796 703 353 398 39 1493 2.3% Dolna Banya 895 0.0% Dolna 4,044 0.0% Mitropoliya Elena 3,816 0.0% Gabrovo 16,208 403 396 254 86 1139 7.0% Haskovo 24,593 565 331 119 1,015 4.1% Krushari 216 6 6 2.9% Levski 3,189 127 184 5.8% Pavlikeni 2,074 25 60 21 15 0 121 5.8% Pernik 28,245 6,491 6,491 23.0% Plovdiv 153,771 4,243 7,633 0 182 0 12,058 7.8% Septemvri 2,174 0.0% Shabla 806 0.0% Sofia* 365,055 1,328 1,099 7,331 5,096 5,844 1.6% 18 These amounts include only amounts processed by municipalities through separation lines/MBT in the newly constructed RWMCs while the amounts used to calculate the target under art, 31 of the WMA include also amounts collected by PROs, by collection points, separated waste delivered directly by firms, and compost from separately collected green waste. 34 Stara Zagora 49,991 20,093 20,093 40.2% Veliko Tarnovo 18,752 2,024 2,024 10.8 Varna 132,057 2,435 2,764 99 1,143 6,441 4.9% Vidin 16,774 40 47 36 123 0.7% Total 819,543 30,502 3.7% Note: Outliers (data in red) are not taken into account in the estimation of total recovery rate. In fact the analysis is based on information from 15 municipalities because the other 5 municipalities were not part of RWM systems in 2016. *According to Sofia Municipality, the amount of waste submitted for recycling from Sofia municipality covers only recycables separated through MBT installation during the defect notification period when the installation was put in opeartion and excludes waste quantities delivered for recovery through other methods. In addition, waste submitted for recycling does not include compost of 5,324 t from installations for biological treatment which are part of RWMC. Source: Data from questionnaires. 76. The total amount of waste captured by municipalities that is recycled is presented in Table 14. Table 14: Waste recycling via municipalities, ton Delivered for recycling municipal waste 80,623 Recycling after pre-treatment1 52,454 Total 133,077 Note: 1 Represents 3.7 percent of waste submitted for preliminary treatment (1,417,702). Source: NSI and World Bank staff estimations. Collection of packaging materials (dry recyclables) by PROs 77. The PROs responsible for packaging waste also collect and recycle waste. According to NSI data, they recover approximately 68 percent of the amounts placed on the market (Table 15). Table 15: Waste Recycling via PROs 2016 Packaging materials put on the market, ton 421,145 Recycled, ton 287,777 Recycled, percent of packaging materials 68 Source: NSI. 78. The requirements of Directive 94/62/EC as amended have been transposed into Bulgarian legislation via Bulgarian WMA and Regulation on packaging and packaging waste. The Government of Bulgaria negotiated a transitional period for achievement of recycling and recovery targets until 2014. The current targets for packaging are: • Overall recovery target (by weight): 60 percent. • Overall recycling target (by weight): 55 percent with specific recycling target for paper/cardboard (60 percent), plastic (22,5 percent), metal (50 percent), wood (15 percent) and glass (60 percent). 35 79. In addition, the Waste Framework directive introduces targets for separate collection and recycling of paper, plastics, glass and metals (this includes packaging waste). These targets are transposed in the Bulgarian legislation: • Recycling: 50 percent of the waste form households (Article 31, par.1, item 1 of the WMA). The 50 percent target for re-use preparation and recycling of waste materials, including at least paper and cardboard, metal, plastics and glass from households and similar waste from other sources, can be reached by each municipality within the following deadlines and quantities under para 15 of the Transitional and Conclusive Provisions of WMA: o by 1 January 2016 – at least 25 percent of their total weight; o by 1 January 2018 – at least 40 percent of their total weight; o by 1 January 2020 – at least 50 percent of their total weight. 80. Bulgaria, like almost all EU member states, has met the target for recycled packaging waste (Figure 18). The recycling covers: material recycling and other forms of recycling (e.g. organic recycling). The target of 55 percent recycled packaging waste was met by all member states except Hungary, Malta, Latvia and Romania. Figure 18: Recycling rates in the EU Note: Data for Malta and Cyprus is for 2014. Source: Eurostat. Total amounts of dry recyclables 81. Combining the results in Table 14 and Table 15 shows the total amount of waste delivered for recycling: Table 16: Total Waste Recycling 36 Ton Share of total waste generated, % Delivered for recycling municipal waste 80,623 2.8 Recycling via pre-treatment 52,455 1.8 Recycling via PROs 287,777 10.0 Total delivered for recycling, ton 420,855 14.6 Total generated waste 2,881,330 100.0 Source: World Bank staff estimates based on MoEW and NSI data. 82. It could be concluded that about 15 percent of the total municipal solid waste is recycled and these 15 percent apply for paper, plastics, metal and glass only (calculated according to the respective method as in Commission Decision 2011/753). Recycling of green waste from parks etc. as compost is not considered because most of the composting installations have become operational only recently and only in few municipalities, giving insufficient time to assess effectiveness. Please note that the production of compost like output or RDF via processing of mixed MSW cannot be considered “recycling,� at best this is “recovery.� 83. To estimate the recycling as a percentage of the recyclables (i.e. recycling potential) in the waste, the morphological composition needs to be used as given by MoEW. Table 17: Typical Morphology of Municipal Solid Waste, 2012-15 above 150 000 50 000 – 150 000 25 000 – 50 000 3 000 -25 000 Below 3 000 inhabitants inhabitants inhabitants inhabitants inhabitants Food waste 28.9% 30.6% 28.0% 23.2% 15.6% Paper 11.4% 9.4% 8.1% 8.5% 6.1% Cardboard 9.4% 8.2% 6.9% 5.5% 4.0% Plastics 11.3% 15.4% 12.8% 10.1% 10.3% Textile 2.8% 2.9% 2.9% 3.7% 2.0% Rubber 0.9% 1.0% 1.0% 0.9% 1.0% Leather 0.9% 1.0% 1.0% 0.9% 1.0% Green waste 11.0% 11.0% 13.1% 21.7% 30.9% Wood 2.0% 2.1% 2.9% 2.0% 2.9% Glass 9.2% 7.8% 7.0% 6.1% 2.4% Metals 1.9% 2.0% 2.0% 2.0% 1.9% 37 Inert waste 9.7% 8.0% 13.7% 14.8% 21.3% Hazardous waste from households 0.6% 0.6% 0.6% 0.6% 0.6% Total 100.00% 100.0%о 100.00% 100.00% 100.00% 19 Source: MoEW 84. For calculating the recyclables, a summary as presented in Table 18 is used, where the ranges are based on medium and bigger cities where the majority of the population lives: Table 18: Waste and recyclables, ton Total waste 2,881,330 waste composition Min (%) Max (%) Min (t) Max (t) Paper and cardboard 17 20 489,826 576,266 Glass 7 9 201,693 259,320 Metal 2 2 43,220 66,271 Plastics 10 15 288,133 432,199 Total 36 46 1,022,872 1,334,056 Note: This table summarizes table 17. Source: World Bank staff estimates based on MOEW 85. It could be concluded that between 32 - 42 percent of the total amount of recyclables in the waste is recycled based on the amount of waste delivered for recycling of 420,855 ton as presented inTable 18. 86. A critical issue is the amount of packaging materials put on the market as listed by the PROs20 (421,145 ton,Table 15). Compared to the total amount of recyclables (table 18), this is rather low. There is however no data available for packaging waste in the total waste flow as the method to analyse this is not included in the before mentioned “Methodology for identification of morphological content of municipal waste�. Since there is no Bulgarian data available and since the split in packaging dry recyclables and non-packaging dry recyclables is not included in the Bulgarian methodology for determining the morphology of MSW, for some estimations data from the Netherlands and Germany has been used. The estimated amounts of packaging materials in the total MSW are presented in Table 19. Table 19: Estimated amount of packaging waste in MSW 19 Methodology for identification of morphological content of municipal waste (approved by the Minister of Environment and Water with Ministerial Order №744/29 September 2012). 20 Тhe total amount of packaging materials put on the market exceeds the reported amounts by PROs and is therefore subject to adjustments based on an additional survey. 38 Percent amount packaging waste packaging Total waste 2,881,330 waste Min Max composition (%) (%) Min (t) Max (t) Min (t) Max (t) Paper and cardboard 17 20 489,826 576,266 40 195,930 230,506 Glass 7 9 201,693 259,320 90 181,524 233,388 Metal 2 2 43,220 66,271 25 10,805 16,568 Plastics 10 15 288,133 432,199 65 187,286 280,930 Total 36 46 1,022,872 1,334,056 575,546 761,391 Source: World Bank staff estimates. 87. It could therefore be concluded there is a significant difference between the NSI data on packaging materials put on the market and the estimated data. The difference can partly be explained by differences in waste composition between Germany and the Netherlands and Bulgaria but the difference indicates that further research needs to be done by MoEW into the validity of the PRO data21. To this end, the methodology for assessing the morphology needs to include an analysis of the packaging waste compared to non-packaging waste. 88. Suggested recommendations to improve effectiveness. If indeed large amounts of packaging waste remain in the mixed waste, this burdens the municipal public sector which finances the management of such waste through the mixed waste stream. Conversely, the more packaging waste is channelled to the separated at source dry collection system, the financial burden on municipalities will be eased as they will need to handle less waste. It is therefore recommended that the initial findings of this review are studied further to confirm if there is indeed room for reducing public spending and optimizing municipal waste stream. Recommendations Waste management spending 89. Currently spending in municipal waste management improvement is mostly concentrated on the construction of RWMCs including mixed waste separation lines with recovery operations, (RDF production and bio-waste stabilisation), composting facilities for separately collected green waste (three anaerobic installations and facilities for aerobic composting) and sanitary landfills for non-hazardous waste. The spending is initiated by the prevailing situation in Bulgaria and the requirement to meet EU targets. It seems however, that the high spending up to now is resulting in low outcomes such as quantity of separated recyclables at low quality, quantities of compost from green waste and bio-waste treatment by anaerobic installations. To improve the spending situation, it might be worthwhile to investigate in more detail the need for: 21 According to MOEW, based on sample of morphology of selected municipalities, the share of recycables hovers around 25 percent, max 30-32 percent for municipalities with mostly urban population. 39 • enhancing separation at source especially of plastics, paper, glass and metals as shown by prevailing practices within target compliant EU member states. Separation at source will result in lower overall costs and substantially higher effectiveness as compared to separation after collection as shown by waste separation practices in many EU member states. However substantial communications and public awareness campaigns will be needed. Therefore, budget allocations will be needed by municipalities and could partially be covered by PROs. In EU member states the allocation varies between Euro 1- 6/inhabitant depending on the size of municipality. With an average of BGN 6/inhabitant it would mean a total annual budget of BGN 42 million. • the projects proposed under OPE 2014-2020 include aerobic and anaerobic composting installations and waste separation lines with recovery operations. Home composting could be promoted especially of garden waste. Moreover, throughput improvement of existing composting installations could be investigated. Thereto a market survey study would be needed to assess demand, prices, required quality, etc. Implementation of certain technical solutions and including avoided landfilling costs (and deductions) in the cost calculations should meet the prevailing economic conditions so that cost/ton will be affordable. • processing biowaste from sorting installations (and not from separate collected biowaste) should be referred to as “biostabilisation� and not as “composting�; it should be noted that the use of the output of the biostabilisation process as backfilling material is not considered recycling but can be considered “material recovery� as mentioned in art 11.2(b) of the Waste Framework Directive. • a detailed assessment of the operational costs of selected municipalities having high costs/ton for waste collection and public area cleaning is recommended to be carried out and subsequently benchmarking with municipalities currently having acceptable cost/ton levels. Information given in the questionnaires have to be taken with some caution as municipalities have different opinion on cost items to be included. • the gradual introduction of amortization in tariffs to be paid also in case of asset acquisition, grant/subsidy financing in order to create sustainable operations and to make the waste generator more aware of the need to separate at source. Currently, invoices for households and CII sector do not clearly show the breakdown of costs of services. Tariff to be paid has to be clear and transparent. • reduction or exemption of VAT payment for households and levelling the VAT payment for municipalities with private sector payment. Several EU member states have exemption of VAT payment on household waste or reduction of VAT on certain activities such as recycling. A critical review might be needed especially when amortization will be introduced in tariff setting meeting the generally acceptable affordability level (1-1.5 percent of spendable income for households). Data collection and reporting 90. Improvement of efficiency and effectiveness is primarily the responsibility of the municipality. Therefore, reliable data are needed. These data must be used by the municipalities to review and enhance their own systems and need to be reported to one centralized organization for analysis and policy development. Data needs to be gathered from individual treatment operations, even if they are operated (or owned) by one entity. All stakeholders (collectors, transporters, recyclers, landfill operators, etc) in the waste management chain should report on 40 quantities (weight) received, processed, transported, etc. Monitoring and enforcement is a task of the centralised organization. Although these requirements exist in current Bulgarian legislation it seems that the system is not properly functioning, considering the differences in statistical information between the various ministries/organizations. Financial reports 91. The establishment of uniform and transparent reporting system on MSWM services with clear guidelines for municipalities on cost items is a priority. Cost reporting system by municipalities to MOF needs to be amended showing clearly each activity and cost items for each activity and the amortization costs. In this respect, the Local Taxes and Fees Act already envisages the development of an Ordinance on unified chart of accounts for delivery of waste management services in municipalities (by March 2019). It is recommended that the Ordinance is combined with Guidelines on generating revenue from municipal waste fee and calculating the eligible expenditures for the provision of waste management services on the territory of the municipality included in the chart of accounts. A tentative template for waste management services and eligible expenditures is given in Annex D. To ensure uniform implementation, training of the staff on implementation of the Ordinance and Guidelines will be needed to be delivered to all 265 municipalities. 92. Like private companies also municipal enterprises involved in waste management should be obliged to prepare audited annual financial reports. Waste collection and waste separation 93. Investing in tracking systems (GPS) could improve efficiency and effectiveness of waste collection & transportation. There are relative cheap modern technologies that can be used to track planned routes of waste trucks, location accuracy of containers, fullness of containers, servicing of waste containers etc. 94. To achieve the targets set for recyclable materials, improving the separation at source would be critical. Today, the PROs have set up systems for collecting of packaging waste but evidently (as in many other countries) the public does not distinguish between packaging and non- packaging materials but separates on type of material: paper, plastic, glass and metal. Setting up a parallel system for collecting “dry recyclables� next to the PRO system (as is ongoing in Gabrovo) is not considered a recommended practice as it would be very difficult to explain to the public the difference between packaging and other dry recyclable; and it is therefore doubtful whether such parallel system will contribute to higher recovery rates. 95. Instead, it is recommended to enhance the collection system of the PROs via public awareness actions aimed to increase the recovery of recyclables. To this end a system to determine the packaging / non-packaging quantities in the collected waste needs to be developed and an agreement between the municipalities and the PROs on costs and benefit sharing needs to be developed. 96. Further investment in sorting lines dedicated to separation of recyclables from mixed municipal waste should be critically reviewed and consider the efforts proposed and needed to 41 increase the effectiveness of separate collection of recyclables. The effectiveness of waste separation cannot be improved via post collection separation. This is evident from international experiences. Even with more sophisticated equipment and automation, sufficiently higher recovery rates are unlikely if biodegradable waste is in the mixed waste. It may even be expected that the recovery rate at such installations will drop further if the effectiveness of the collection system of the PROs improves. 97. Investment in treatment of mixed municipal solid waste is needed to reduce the amount of biodegradable waste that needs to be landfilled. Any bio-stabilisation process benefits from sorting out those materials that hamper stabilisation. Sorting as pre-treatment option needs to focus on removing these materials, secondary might be to sort out materials in such a way that they can be send for re-use. 42 Annex 1. References Clean Europe Network Hall, D. (2010) Waste Management in Europe: Framework, Trends, and Issues, Public Services International Research Unit, Business School, University of Greenwich, London European Commission Press Release, Circular Economy: New rules will make EU the global front-runner in waste management and recycling, May 22, 2018. http://europa.eu/rapid/press-release_IP-18-3846_en.htm Ministry of Environment and Water (2014). National Waste Management Plan 2014-2020, Sofia Bulgaria Ministry of Environment and Water (2012) Methodology for identification of morphological content of municipal waste (approved by the Minister of Environment and Water with Ministerial Order №744/29 September 2012) World Bank (2012) What a Waste: A Global Review of Solid Waste Management, Washington, D.C. World Bank (2018) Spending Review on Policing and Firefighting, Washington, D.C. 43 Annex A-1 Analysis of Actual Waste Collection Costs 44 Annex A-2. Analysis of Estimated Waste Collection Costs CAPEX means amortization costs taking into account depreciation and interest (3%) Distance to landfill 30km 15km 15km Collection system Municipal collection Container system 1100.00 1100.00 1100.00 inhabitants 30000.00 60000.00 150000.00 Generation (kg/cap/day) 0.70 0.75 1.00 waste quantity (tons/year) 7665.00 16425.00 54750.00 Collection truck-airvolume 10.00 20.00 10.00 20.00 10.00 20.00 compaction 3.00 3.00 3.00 3.00 3.00 3.00 volume/truckx90%(m³) 27.00 54.00 27.00 54.00 27.00 54.00 load/truck(500kg/m³) 4.50 9.00 4.50 9.00 4.50 9.00 Price truck (BGN) 240000.00 300000.00 240000.00 300000.00 240000.00 300000.00 Price container -1100 litre(BGN) 600.00 600.00 600.00 600.00 600.00 600.00 Working days/year 260.00 260.00 260.00 260.00 260.00 260.00 Waste density (kg/m³) 185.00 185.00 185.00 185.00 185.00 185.00 weight/container (kg) 162.80 162.80 162.80 162.80 162.80 162.80 Collection time(minutes) Time/shift (minutes) 480.00 480.00 480.00 480.00 480.00 480.00 Fuelling,etc. 20.00 20.00 20.00 20.00 20.00 20.00 Garage to collection area 20.00 20.00 20.00 20.00 20.00 20.00 Lunch break 30.00 30.00 30.00 30.00 30.00 30.00 Landfill to garage Available for collection and transport 410.00 410.00 410.00 410.00 410.00 410.00 Cycle time truck Collection/container(minutes) 5.00 5.00 4.00 4.00 3.00 3.00 containers/truck 27.64 55.28 27.64 55.28 27.64 55.28 collection time(minutes) 138.21 276.41 110.57 221.13 82.92 165.85 transport to landfill (Minutes) 45.00 45.00 45.00 45.00 45.00 45.00 Unloading at landfill 15.00 15.00 15.00 15.00 15.00 15.00 transport to collection area 45.00 45.00 45.00 45.00 45.00 45.00 total(minutes) 243.21 381.41 215.57 326.13 187.92 270.85 trips/day/truck 1.69 1.07 1.90 1.26 2.18 1.51 Daily weight/truck (tons) 7.59 9.67 8.56 11.31 9.82 13.62 Capacity/year/truck 1972.40 2515.39 2225.31 2941.77 2552.63 3542.21 Number/trucks 3.89 3.05 7.38 5.58 21.45 15.46 truck availability 0.80 0.80 0.80 0.80 0.80 0.80 actual truck number 4.86 3.81 9.23 6.98 26.81 19.32 containers/day(collection 3/week) 301.81 301.81 646.74 646.74 2155.78 2155.78 filling degree 80% 377.26 377.26 808.42 808.42 2694.73 2694.73 Investments (KM) Collection trucks 1165839.25 1142717.69 2214294.52 2093765.20 6434540.25 5796165.46 Containers 226357.26 226357.26 485051.27 485051.27 1616837.55 1616837.55 45 Operational costs Distance to landfill 30km 15km 15km Wages 1 Driver+2 loadersx1,18=3.55/truck 13.80 10.82 26.20 19.82 76.14 54.87 Average costs (BNG/year) 9000.00 9000.00 9000.00 9000.00 9000.00 9000.00 Costs/year(KM) 124161.88 97359.55 235822.37 178388.79 685278.54 493833.30 Total Including management (25%) 155202.35 121699.43 294777.96 222985.99 856598.17 617291.62 Fuel km/cycle garage to collection area 10.00 10.00 10.00 10.00 10.00 10.00 collection route 14.00 28.00 11.00 22.00 8.00 16.00 To landfill 30.00 30.00 15.00 15.00 15.00 15.00 to collection area 30.00 30.00 15.00 15.00 30.00 30.00 Total km/day 523.66 318.73 649.39 420.83 2694.61 1442.70 Total km/year 136150.61 82869.51 168840.55 109416.77 700599.35 375102.01 Litre (0,35 litre/km) 47652.71 29004.33 59094.19 38295.87 245209.77 131285.70 costs/year( BGN 1,9/litre) 90540.15 55108.22 112278.97 72762.15 465898.57 249442.84 lubricants (1.5ltr/100km) 8169.04 4972.17 10130.43 6565.01 42035.96 22506.12 Tyres 4-6/truck;30,000km 18.15 16.57 22.51 21.88 93.41 75.02 cost(600 BGN/tyre) 10892.05 9944.34 13507.24 13130.01 56047.95 45012.24 M&R truck(5%) 58291.96 57135.88 110714.73 104688.26 321727.01 289808.27 containers(2%) 4527.15 4527.15 9701.03 9701.03 32336.75 32336.75 Total 62819.11 61663.03 120415.75 114389.29 354063.76 322145.02 Insurance Trucks(1,0%) 11658.39 11427.18 22142.95 20937.65 64345.40 57961.65 Sub-total OPEX 339281.09 264814.38 573253.30 450770.10 1838989.81 1314359.50 Miscelleneous(10%) 33928.11 26481.44 57325.33 45077.01 183898.98 131435.95 Total OPEX 373209.20 291295.81 630578.63 495847.11 2022888.79 1445795.45 Cost/ton (BGN) 48.69 38.00 38.39 30.19 36.95 26.41 average OPEX (BGN/ton) 43.35 34.29 31.68 Amortization Trucks(7 years,3%) 187117.20 183406.19 355394.27 336049.31 1032743.71 930284.56 Containers(5 years,3%) 49413.79 49413.79 105886.69 105886.69 352955.64 352955.64 sub total CAPEX 236530.99 232819.98 461280.96 441936.01 1385699.35 1283240.19 CAPEX (BGN/ton) 30.86 30.37 28.08 26.91 25.31 23.44 Average CAPEX (BGN/ton) 30.62 27.50 24.37 Grand total 609740.19 524115.79 1091859.59 937783.12 3408588.14 2729035.64 Cost/ton(BGN) 79.55 68.38 66.48 57.09 62.26 49.85 Average (BGN/ton) Excl.VAT 73.96 61.79 56.05 Outsourced (BGN/ton) incl. VAT 88.76 74.14 67.26 Inhouse (BGN/ton) incl. VAT¹ 85.29 71.40 64.73 Inhouse cost calculation (40% wages) including VAT: ¹ OPEX: 43,35*0,6*1,2 31.21 24.69 22.81 OPEX: 43,35*0,4= 17,3 17.34 13.72 12.67 CAPEX: 30,6*1,2= 36,7 36.74 32.99 29.25 total: 85,2 85.29 71.40 64.73 Outsourced services are subject to 20% VATcosts on OPEX and CAPEX Inhouse services are subject to 20% VAT on OPEX excluding wages or 12% on total OPEX costs (and in future 20% on CAPEX) Average Costs for municipalities (including amortization, VAT and margin for profit/risk) Outsourced In-house Inhabitants OPEX CAPEX Total OPEX CAPEX Total 30000 57.22 40.41 97.64 48.55 36.74 85.29 60000 45.26 36.29 81.55 38.41 32.99 71.40 150000 41.81 32.17 73.99 35.48 29.25 64.73 Average¹ 43.27 33.4 76.68 36.72 30.37 67.09 ¹ Average based on 5% waste generation by cities<30000;20% by cities <150000 and75% by cities >150000 46 Annex B-1 Waste Treatment Actual Costs ANNEX B-1: Analysis treatment cost (BGN/ton) in 2016 Quantity delivered (t) treatment (BGN/ton)² Population class municipalities questionnair NSI NSI separation landfill ccomposting questionnair NSI <15000 Bratia Daskolovi 0 0 26.80 17.10 8843 8261 Dolna Banya 0 0 12.75 4912 4531 Elena 0 334 18.10 20.19 20.90 7059 8798 Krushari 0 0 40.70 4126 4126 Shabla 806 817 40.70 4539 4610 806 1151 29479 30326 15-50000 Aksakovo 0 365 17.64 20968 20968 Dolna Mitropolia 0 440 18.9 14.90 14.60 20611 18551 Levski 2109 2136 39.05¹ 24.13 21.84 14604 18149 Pavlikeni 2074 2153 39.05¹ 24.13 21.84 24439 21744 4183 5094 80622 79412 50-150000 Gabrovo 16208 19294 38.33³ 26 70122 59663 Haskovo 24593 0 17.89 13.18 24.95 115698 88471 Pernik 28245 29508 26.5 17.34 26.47 101467 90195 VelikoTarnovo 9376 11472 18.10 20.19 20.90 91520 87181 Vidin 0 529 21.5 6 55790 55790 78422 60803 434597 381300 >150000 Burgas 63796 65671 19 8 232311 209331 Plovdiv 153771 125234 29.9 343424 343424 Stara Zagora 49991 57167 26.80 17.1 172906 158262 Varna 114145 148113 23.06 17.64 343991 343991 381703 396185 1092632 1055008 Sofia 365055 671753 32.20 15.12 10.82-15.83 1323637 1323637 red means municipal enterprise is operator ¹ Based on min 25% separation. If less than 25% the tariff will be BGN 29.1 ² Treatment cost (BGN/ton) is gatefee excl. VAT. Municipalities calculate and pay the VAT ("reverse charging") ³ Operator in Gabrovo is investor/owner of separation line thus tariff includes amortization costs General conclusion: figures have to be treated with caution as (i) there are differences on quantities and population between questionnaires and NSI information and (ii) municipalities did not provide details in the questionnaires about costs items covered by gate fee Findings municipalities (excl. Sofia) General: Regional Waste Management centre consists in principle of (i) separation line for mixed municipal waste but this line can also be used for sorting of pre separated dry recyclables; (ii) composting installation consisting of open air composting or anaerobic composting of green waste mostly waste from maintenance of parks/green areas; (iii) sanitary landfill. RWMC serves a number of municipalities. Officially there are 55 centres. Total waste generation would be 2.881 million tons with 80,623 tons separated at source (NSI) thus leaving 2.8 million tons mixed waste to be collected . Statitistics of ExEA indicate that 1,646,420 would be directly landfilled and 1,154,287 is offered for separation. Treatment is mostly outsourced to private companies and cost/ton is based on information given in the questionnaires. The gate fees are excluding VAT but municipalities have to add 20% . Moreover the gate fee is excluding amortization as the municipalities are the owner of the equipment and landfill except for Gabrovo where private compny invested BGN 2 millionin separation line. Reporting system by Municipalities to MoF, NSI and ExEA on costs and quantities has to be taken with some caution as there are no clear instructions on costs items and waste fractions to be included. This results in different statistical information with various organizations. Some RWMC were put into operation in the course of 2016 and as a result municipalities report their total costs not having the split up between old and new situation. 47 continued Separation Weighted average of gate fee excluding VAT has been calculated for 7 municipalities: cost/ton tons total (BGN) Levski 39 2109 82356.45 Pavlikeni 39 2074 80989.7 Gabrovo¹ 26 16208 421408 Haskovo 18 24593 439968.77 Pernik 27 28245 748492.5 V. Tarnovo 18 9376 169705.6 Varna 23 114145 2632183.7 196750 4575104.72 Average OPEX incl. margin,excl.VAT 23.25 Average OPEX including VAT 27.90 ¹ corrected for CAPEX: 12yrs,3% result in 200000/16208=12.33. OPEX:38.33-12.33=BGN26/ton. Landfills The weighted average of gate fees excluding VAT and deductions but including profit margin in case of private operator would be: cost/ton capacity total Pernik 17 148000 2581120 Varna 18 422780 7457839.2 Vidin 22 309600 6656400 Haskovo 13 148500 1957230 Nikopol 24 101775 2455830.75 D.Metropolia 15 788500 11669800 Gabrovo 26 397428 10333128 V.Tarnovo 20 244217 4930741.23 S. Zagora 27 742486 19898624.8 Burgas 14 400000 5424000 Average 19.81 3703286 73364714 Incl VAT 23.77 Composting analysis has not been carried out has it is related to green waste mainly from park maintenance not being a municipal waste. Moreover the quantities in 2016 are very low (23,766 tons) not justifying expensive investments in anaerobic/aerobic facilities. Sofia Municipality in-house¹ excl. VAT incl. VAT² Separation 32.2 36.064 Landfilling 15.12 16.93 ¹ Only OPEX, no amortization ² VAT at 12% as no VAT payment on wages (assumed to be 40% of cost) 48 Annex B-2 Waste treatment Estimated Costs ANNEX B-2: Cost calculation mixed waste separation lines Mixed waste separation Maximum waste separation Quantities (2016) 15tph 15tph Inhabitants served by RWMC 127000 127000 generation(kg/cap/day) 0.7 0.7 delivered waste/year(tons) 32448.5 32448.5 Recyclables total in waste (%) 34 11032.49 34 11032.49 saleble separation (%) 3.50 1135.6975 10 3244.85 Separation line lines (15tph installed capacity) Annual capacity(tons) 37440 37440 Input (tpy) 32448.5 32448.50 Cost calculation Investment M/E works 3000000 3000000 civil works 2000000 2000000 total 5000000 5000000 Costs/year Amortization (CAPEX) 350000 10.79 350000 10.79 M/E works (12 years/no interest) 250000 250000 Civil works (20 years,no interest) 100000 100000 Operations (OPEX) Transport to landfill ¹ 5 25958.8 129794 25958.8 129794 M+R 110000 110000 M/E (%) 3 90000 90000 civil (%) 1 20000 20000 Labour (one shift)² manager 1 15000 15000 15000 engineer 1 12000 12000 12000 baler 1 9000 9000 9000 drivers 1 9000 9000 9000 sorters 8 7200 57600 14 100800 guards 1 7200 7200 7200 administr 1 12000 12000 12000 secretary 1 10000 15600 15600 total 137400 180600 working time (1.77) 243198.00 319662.00 overhead (20%) 291837.6 383594.4 Energy 20kWh/ton 0,1/kwh 648970 64897 648970 64897.00 Office 5000 5000 Total OPEX (excl VAT) 601528.6 18.54 693285.40 21.37 Total cost/ton excl VAT and profit margin 29.32 32.15 Revenues ³ Sales recyclables tons 1135.6975 3244.85 average selling price 70BGN/ton� 79498.825 227139.5 income/ton 2.45 7 Total cost (BGN/ton) excl. VAT and profit margin 26.87 25.15 Note: Costs only for separation of recyclables and thus excluding costs for processing of RDF and stabilised soil. Average OPEX is about BGN 20/ton and CAPEX BGN 11/ton. ¹ 20% weight reduction on input (20% could be a contract condition) ² Effective working hours: (52 weeks*5 days=260 days)-holidays (30 days)-non availabilty(10 days)=220 days/year*8 hours=1760 hrs/yr Operating hours plant: 52 weeks*6 days*10 hours=3120 hrs/yr. Staff increase 3120/1760=1.77. ³ Operator is not owner of waste but has obligation to reduce landfilling with 20-25% but he owns revenues on sales of recyclables depending on contract conditions. Operator is responsible for all costs such as maintenance, energy , staffing, office, transport to landfill. 4 Based on income on recyclables in Burgas (BGN106060/1493=BGN71/ton) Gate fee incl. VAT and margin for profit/risk OPEX inhouse outsourced 18.54 20.76 24.47 CAPEX 10.79 12.08 14.24 total 32.85 38.72 49 Annex B-3 Cost calculation landfills ANNEX B-3: Calculation Landfill costs Assumptions RWM centre (127,000 inhabitants) RWMC (127,000 inhabitants) Delivered quantity (tons/year) (0,7*127000*0,365) 32448.5 (0,7kg/cap/day) 50990.5 (1,1kg/cap/day) Separated recyclables (3,5%) 1135.70 1784.67 humidity loss (20% on 46,5% of total waste) 3017.71 4742.12 total deducted 4153.41 6526.784 To be landfilled incl cover material 28295.09 44463.72 cover material (tons/year) 3250.00 5099.05 lifetime 20 years divided into 4 cells of 5 years each Increase compensated by increase in separation 1st cell 141475.46 222318.58 2nd cell 141475.46 222318.58 3rd cell 141475.46 222318.58 4th cell 141475.46 222318.58 Total tons 565901.84 889274.32 volume (m³) 565901.84 889274.32 Storage density (t/m³) 1 1 Storage height (m) 20 20 lifetime first storage cell (years) 5 5 First cell storage area: 150x150m²/200x150m² 22500 30000 service area 150 x50m² 7500 7500 Total area 30000 37500 Civil works Description unit total units cost/unit total(BGN) service area m² 7500 35 262500 7500 35 262500 garage/repairshop incl tools m² 250 750 187500 187500 gas flare 250000 250000 electricity network 150000 150000 water supply system 100000 100000 fence m 700 100 70000 850 100 85000 gatehouse area m² 250 900 225000 225000 portacabin offices 100000 100000 surface water ditch m 550 100 55000 650 100 65000 leachate ponds l.s. 2 75000 150000 150000 sub total civil works(20 years depr) 1550000 1575000 storage cell m² 22500 80 1800000 30000 80 2400000 closing after 5 years m² 22500 35 0 0 sub total civil works (5 years depr) 1800000 2400000 grand total civil works 3350000 3975000 Equipment Compactor/compactor l.s. 1 500000 500000 Excavator l.s. 1 235000 235000 weighbridge l.s. 1 60000 60000 tractor trailer l.s. 1 55000 55000 aerators leachate ponds 2 30000 60000 wheels washing 1 70000 70000 Various tools 1 20000 20000 Total equipment 1000000 1000000 50 Amortization costs/year civil works Cell (5 years,3%) 392940.00 523920 Service area (20 years,3%) 104160 105840 Equipment (10 years,3%) 117200 117200 Total amortization 614300 746960 OPEX/year Wages month Landfill manager 1 1500 18000 Assistant manager 1 1250 15000 Gatehouse weighbridge operator 2 1000 24000 Site controller 2 1000 24000 Drivers 3 850 30600 Guard 2 750 18000 technician workshop 1 1000 12000 engineers 1 1000 12000 administrator 2 1000 24000 secretary 1 850 10200 Sub-total 187800 Overhead (25%) 234750 234750 Energy Bulldozer/Compactor(5hrsx260daysx250kW) 1 ltr=10.6kwh 260000 46603.77 364000.00 65245.28 excavator(3 hours x 260 days x250kw) 156000 27962.26 234000.00 41943.40 site:100kWx10hrsx260days 208000 24336 24336 leachate aearators (8hrsx15Kwx2=240kwh/day) 87600 102492 102492 Sub-Total 201394.04 234016.68 M&R Civil works (0,5%) 7750 7875 Equipment(5%) 50000 50000 Sub Total M+R 57750 57875 Insurance equipment 1000 1000 Environmental monitoring 30000 30000 Office consumeables 20000 phone, utilities 5000 Audit 5000 total 30000 30000 Total OPEX 22.16 554894.04 22.34 879533.36 Total CAPEX 24.53 614300.00 18.98 746960.00 Grand total 46.68 1169194.04 41.32 1626493.36 Cost/ton(excl.VAT) 46.68 41.32 closure cell (deduction art 60)/ton 22500 m² 40/m² 900000 7.40 30000.00 40.00 1200000.00 6.28 landfill tax (deduction art 64)/ton 38.00 38 Tariffs including VAT and margin (profit/risk) OPEX in house outsourced 22.16 24.82 29.25 CAPEX 24.53 27.47 32.38 total 52.29 61.63 51 Annex C-1 Public area cleaning actual costs 52 Annex C-2 Estimated public area cleaning costs ANNEX C-2: Estimate street cleaning costs Assumptions: > one hand streetsweeper per 1,500 inhabitants > one mechachanical streets weeper per 15,000 inhabitants > breakdown of total costs: cleaning 75%; materials 20%; transport and treatment 5% > total reported cost for Burgas: BGN 24/inhabitant or BGN 18 for cleaning and BGN 6/inhabitant for materials and treatment > total reported costs for Sofia: BGN 48/inhabitant or BGN 36 for cleaning and BGN 12/inhabitant for materials/treatment Burgas city (232,311 inhabitants)-outsourced services OPEX CAPEX total Hand sweepers 155 1674000 Mechanical sweepers 16 464000 656000 materials/treatment (BGN 6/inh.) 696933 696933 sub total 2834933 1352933 Outsourced services(10% profit/risk) 418786.6 Total 4606652.6 snow cleaning (16%) 737064.42 monitoring, etc. (5%) 267185.85 Grand total estimated costs 5610902.87 reported costs 5624500 Assumptions: > In view of higher population density in Sofia: one hand sweeper per 2,000 inhabitants one mechanical sweeper per 20,000 inhabitants Sofia City (1,323,637 inhabitants)-outsourced services OPEX CAPEX Hand sweepers 662 7149600 Mechanical sweepers 66 1914000 2706000 materials/treatment 7941822 7941822 sub total 17005422 10647822 Outsourced services (10% profit/risk) 2765324.4 Total 30418568.4 Snowcleaning (24%) 7300456.416 Monitoring, etc. (5%) 1885951.241 Republican roads 5000000 Grand total estimated costs 44604976.06 Estimated Cost/inhabitant 33.70 Reported costs (BGN) 63081000 Reported costs/inhabitant 47.66 Note: In questionnaire total costs are BGN 63,081,000.In additional information with breakdown the following costs are indicated: summer cleaning: 41.1 million winter cleaning: 15 million maintenance and cleaning of republican roads: 5 million total 61.1 million Cost distribution of estimated cleaning costs (Sofia) total cost/inhabitant for cleaning 33.70 OPEX (70%) 23.59 CAPEX (30%) 10.11 Average of 18 municipalities Cost distribution according to questionnaires (see annex C-1): total in house outsourced population 1637330 916930 720400 costs (BGN) 39830221 25815768 14014453 cost/inhabitant 24.33 28.15 19.45 In house outsourced Hand sweepers 6601896 5186880 mechanical sweepers 1772731.333 3361866.667 materials/treatment 6452894.875 3502945 In house is excluding amortization sub total 14827522.21 12051691.67 Outsourced services (10% risk/profit) 1205169.167 Total 14827522.21 13256860.83 Snowcleaning (20%) 2965504.442 2651372.167 Monitoring (5%) 889651.33 795411.65 total 18682677.98 16703644.65 Grand total estimated costs 35386322.63 Reported costs 39830221 Cost distribution according to estimates: total in house outsourced Population 1637330.00 916930.00 720400.00 Cost (BGN) 35386322.63 18682677.98 16703644.65 cost/inhabitant 21.61 20.38 23.19 53 Annex D Template for cost calculation Template for cost calculation Waste management activity Cost items 1.Collection and transport to Direct costs delivery point of household waste -wages incl. uniforms, training, social charges and CII waste (mixed and -fuel, lubricants, tires, repair and maintenance separated fractions) -insurances -amortization of long-term loans - 3rd party costs (in case of outsourcing) Indirect costs -management, administration -office (cleaning, telephone, energy, repairs, rent, etc.) -communication/advertising -third party services (accountant, ICT, consultancy, etc.) -bank costs (short term loans, etc.) -monitoring, enforcement -other costs (taxes and fees) -unforeseen 2. Management “bring stations� See activity 1 3.Transfer and long-haul transport See activity 1 or gate fee (outsourcing) to final disposal 4. Separation mixed waste or See activity 1 plus transport and landfilling costs of rejects or gate fee sorting dry recyclables (outsourcing) 5. Any treatment such as See activity 1 or gate fee (outsourcing) composting, incineration, MBT 6. Landfill operations See activity 1 plus closing/ aftercare, leachate management, LFG collection, monitoring, landfill tax or gate fee (outsourcing) 7. Street cleaning See activity 1 plus final disposal 8.Market cleaning See activity 1 plus final disposal 9 Other activities (see also Annex A and B with calculation examples) ✶ VAT or landfill tax Template is based on following procedure: Task 1: Collect reliable data on type and quantity of waste fractions for design of WM system Task 2: Describe clearly the activities (collection, separation, composting, landfilling, etc.) and the tasks for each waste fraction together with a cost budget number. Task examples are: -collection and transport: might include cleaning around containers -separation mixed waste: cost to be excluding revenues from sales of recyclables, costs to be including or excluding transport to landfill and landfilling costs of rejects -landfill operations: costs including or excluding closure/after care - street cleaning including or excluding weed maintenance, graffiti removal, litterbins handling, snow cleaning, illegal dumps cleaning, etc. Task 3: Identify the cost items for each activity with budget number depending on the design (in- house or outsourced) of the WM system. Introduce internally a reporting system. Task 4: Monitor monthly the actual expenditures with the budget. 54 Annex E National cost assessment Comparison of estimated and actual spending for collection &transportation of waste Estimated cost, Difference actual and BGN/ton Waste collected, ton Estimated spending, BGN Actual spending, BGN estimated spending, BGN Municipal size In-house Outsourced In-house Outsourced In-house Outsourced In-house Outsourced In-house Outsourced <15 000 49 98 4,308 3,816 211,092 372,579 339,852 160,272 128,760 (212,307) 15 000-50 000 49 98 4,183 15,151 204,967 1,484,749 532,116 1,337,153 327,149 (147,596) 50 000-150 000 38 82 33,054 70,953 1,269,604 5,818,146 2,061,182 6,183,925 791,578 365,779 >150 000 35 74 153,771 672,260 5,455,795 49,747,240 10,917,741 90,467,995 5,461,946 40,720,755 Total 37 77 195,316 762,180 7,172,004 58,687,822 13,850,891 98,149,345 6,678,887 39,461,524 Source: World Bank staff estimates based on data from questionnaires and own estimates. Comparison of estimated and actual spending for public area cleaning Estimated cost, Difference actual and BGN/inhabitant Number of population Estimated spending, BGN Actual spending, BGN estimated spending, BGN In-house Outsourced In-house Outsourced In-house Outsourced In-house Outsourced In-house Outsourced Total 20 30 536,806 2,448,672 10,940,106 72,578,638 16,613,013 86,466,208 5,672,907 13,887,570 55