| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchasing Home Regulated Materials Surcharge FAQ Surcharge Item List | Q and A To Address Issues Raised by the Regulated Materials Surcharge (Click here for a printable pdf file) Why is a regulated materials surcharge needed? Who was involved in the decision to impose a regulated materials surcharge and what alternatives were considered? Why wasn’t this decision communicated broadly at that time? Wouldn’t it be simpler and fairer to charge units at the time they need to dispose of waste or sell or divest equipment? Isn’t the surcharge unfair to sponsored research projects and a way of double charging research grants that already pay indirect cost? Why does the surcharge apply to items like computers and lab equipment? Why should the surcharge be imposed if the purchased items are consumed or disposed of off campus, shouldn’t they be exempt from the surcharge? Why is a regulated materials surcharge needed? There are substantial costs associated with the handling anddisposal of materials that may pose environmental or health hazards. The costs of collecting, treating and disposing of these materials as well as the training, record keeping andpermitting for such activities has been and will continue to be paid by theGeneral University Fund. Some auxiliaryand affiliated organizations pay a fee for some services, but the services areprovided free to all academic units. The program operated by ISU’s Environmental Health and Safety (EH&S) Departmenthas been nationally recognized for its cost effectiveness and has served as arole model for programs at many other universities. The regulated materials surcharge is needed to help pay fora new facility that will house these activities. The new facility is needed because of lifesafety deficiencies and physical deterioration of the existing facility whichwas constructed in 1979 as a temporary building. If steps are not taken to replace theexisting facility there is the possibility that university activities could bestopped or significant fines and penalties imposed. Construction of the new facility will cost$10 million. Central funding totaling $4 million has been identified but the balance of the funding will be borrowedusing self-liquidating revenue bonds. This means that the facility must generate a revenue stream equal to theannual debt service requirements for thebonds. The revenue generated by theregulated materials surcharge will pay for the debt service on the building andwhen the debt is retired, will be discontinued. It is projected that it will take 10 to 15 years to retire the bonds. Who was involved in the decision to impose a regulated materials surcharge and what alternatives were considered? Since the existing facility was first cited for life safetydeficiencies over a decade ago, a number of alternatives have beenconsidered.
Why wasn’t this decision communicated broadly at that time? Over the years this project has been under consideration and a number ofoffices were involved in discussing alternatives. There have been a number of changes in staffin EH&S, academic and research administrators. With the announcement in December of thesurcharge it became apparent that adequate communications had notoccurred. The issuance of bonds to support the construction of this facility has been part of both the Universityand the Board of Regents capital approval processes throughout 2003. The intention to implement a surcharge hasbeen noted in numerous public documents related to the capital budget for thefacility and in the documents supporting the issuance of the bonds lastOctober. Additionally, a work group wasformed early in 2003 to develop the systems and procedures to assess andcollect the surcharge. Units mostaffected by the surcharge including Purchasing, Chemistry Stores, Veterinary Diagnostics Lab, Administrative Technology Services andthe Microcomputer Products Center were represented on the committee because itaffected pricing of the products processed by these offices. It was initially thought that theannouncement of the surcharge would be incorporated into the FY04 budgetplanning. But the details ofimplementing the surcharge were more complex than originally thought andchanges in the Regent’s capital planning guidelines created some uncertaintyabout obtaining final approval for the project. Implementation of the surcharge was delayed until after the finalapproval was received and the bonds issued in October 2003. Although many people were aware of the surcharge including major interestgroups affected by the surcharge, the communication with the broader campuscommunity was clearly inadequate. Whena general announcement was made the implementation deadline was imminentallowing little time for units to adjust. The decision to delay and review implementation is intended to helprectify these mistakes. What are the budget implications of the surcharge? The surcharge was specifically designed to try tominimize the cost to any one activity or unit, yet fairly distribute the costto the primary waste generating activities. The table below illustrates the budgetary impact of the surcharge on a broad range of purchases using FY03 purchasing data.
As this table shows, the primary impacts are not in state appropriatedfunds or in grant funds but rather in auxiliary services. Some of these auxiliary units provide servicesto other departments that may become slightly more expensive because of thesurcharge. Because gasoline and automotive products are subject to the surcharge, Transportation Services willpay the surcharge on many items they purchase and will include this cost intheir rate structure. However, thiseffect is consistent with the overall desire to more accurately reflect theactual costs of services, especially services provided to externalconstituencies. The Veterinary Clinicand Veterinary Diagnostic Lab also purchase many items subject to the surchargeand would need to include this cost in their fee structures. As discussed in more detail below, purchases of computers and laboratoryequipment are among the items subject to the surcharge. Over $300,000 of the amount shown under auxiliaries is due to computerpurchases through the Microcomputer Products Center. These charges will be passed along to the ultimate purchaser if thecomputer is to be owned by the university but not if the purchaser is a studentor an individual staff member because the University will have noresponsibility for the disposal of the equipment. As computer prices continueto decline this will also mitigate the budgetary impact of the surcharge oncomputer purchasers. Expensive laboratory equipment is subject to the surcharge but the amountis capped at $1500. Just as shipping andinstallation are a cost of equipment acquisition, the surcharge would need tobe part of the budget planning for equipment purchases. Wouldn’t it be simpler and fairer to charge units at the time they need to dispose of waste or sell or divest equipment? From one perspective, the answer to this question isyes. But it would be risky and itwouldn’t be cheaper. A concern is someindividuals and units would choose to improperly dispose of waste or otherregulated items in order to avoid the expenses involved in properdisposal. Even now, when disposal isfree, we have many instances of abandoned equipment and waste items that can’tbe identified to their original user. Improper disposal can result in fines of over $27,000 per instance andthere are cases of total fines exceeding $1 million at other universities. Some examplesof recent fines include:
TheEPA has recently increased it enforcement activities at universities and theprobability of significant fines is higher than ever. In addition to fines, research activitiescan be significantly disrupted by enforcement actions. Such enforcement action may result in consentagreements that involve expensiveand onerous remedial action inaddition to the fines as well as negative publicityfor the institutions involved. The entire university communitybenefits by the availability of a facility that provides for the safe andefficient disposal of hazardous materials. It is analogous to paying taxes to support the fire department. You may never need the fire department butyou benefit by having it available. Isn’t the surcharge unfair to sponsored research projects and a way of double charging research grants that already pay indirect cost? No. There is a common misperception that researchgrants will pay a disproportionate share of the surcharge. The data above show that that is not thecase. In fact, the surcharge isdesigned to be fair to sponsored research because there are so many otheractivities that use regulated materials but are not subject to indirect costrecovery. The consultants hired toassist the University with the indirect cost rate negotiations reviewed thesurcharge proposal. As explained above,the operating cost of the Environmental Health and Safety Department willcontinue to be paid by the University. EH&S does not directly receiveindirect cost recoveries but it is part of the cost pools that make up theoperations and maintenance component of the indirect cost rate. The surcharge will only be used to pay debtservice on the facility bonds. Sincethis is not part of the O&M cost pool, double charging is not anissue. Why does the surcharge apply to items like computers and lab equipment? Decommissioned lab equipment generates waste. It often contains oils(PCB), heavy metals, hazardous waste batteries and other materials managed byEH&S. Equipment may be checked byEH&S before being sent to asset recovery. Likewise, old computersgenerate hazardous waste because monitors contain large quantities of lead. Circuit boards contain lead and other heavymetals and internal batteries are often hazardous waste. Regulatory controls over computer disposalare becoming increasingly stringent. Why should the surcharge be imposed if the purchased items are consumed or disposed of off campus, shouldn’t they be exempt from the surcharge? We have no practical way of knowing at the point of purchase, whetherthe item will be consumed or disposed of off-campus, and off-campus usersshould be encouraged to use the facility whenever practical and should feelfree to seek services provided in the building whenever needed.EH&S does provide regulated materials services related tooff-campus facilities.The new facilitywill house testing and training facilities activitiesthat will be used by are necessary toregulatory compliance and benefit all users of regulated materials. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchasing Department, purchasing@iastate.edu Copyright© 2002, Iowa State University, all rights reserved Revised 01/04/2005 10:32 AM | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
