Local Government Central

Adjustment Method Questions and Answers

1.  What is the Adjustment Method?

A standard formula that estimates jurisdiction waste generation. The precursor to a diversion rate calculation, it consists of five successive calculations to find:

• Inflation multiplier
• Corrected report-year taxable sales
• Non-residential adjustment factor
• Residential adjustment factor
• Report-year waste generation

2.  Why do jurisdictions use it?

The adjustment method is a low-cost, practical way for a jurisdiction to estimate solid waste generation when compared to the alternative of counting disposal and diversion each year.

3.  How does it work?

Using base-year waste generation tonnage, and population and economic change measurements, the adjustment method estimates waste generation in a measurement year (report-year).  

4.  What measures of change does the formula use?

Population, employment, taxable sales, and inflation. Inflation is used to adjust report-year taxable sales for comparison with base-year taxable sales.

5.  Why are population, employment, taxable sales, and inflation used?

Because they best fit jurisdiction-requested criteria:

• When combined, correlate best to tons of waste generated.
• Simple and easy to use.
• No additional cost to get data.
• Available at county level for all jurisdictions.
• Provide a minimum level of accuracy and uniformity for all jurisdictions.

6.  What input values are used in the formula?

Ten input values are used in the adjustment method formula: 

• Base-year generation amount
• Base-year residential generation percentage
• Base-year population
• Report-year population
• Base-year employment
• Report-year employment
• Base-year inflation
• Report-year inflation
• Base-year taxable sales
• Report-year taxable sales

7.  How can much weight should be given to this report-year waste generation amount?

The adjustment method is the best formula we have for inexpensively estimating waste generation. It works well for most jurisdictions. When evaluating a diversion program, more weight should be given to diversion program implementation data, particularly with smaller jurisdictions.

8.  What are the standard or “default” sources for the adjustment method factors?

Every year the Board gathers applicable adjustment factor data from these sources and posts it on the CIWMB website.

9.  May a jurisdiction use adjustment factors from some other source?

Yes. The factors must:

• Be from a scientifically reliable third-party source.
• Use the same source for both the base-year and report-year.
• Be approved by the Board on a case-by-case basis.

10.  May a jurisdiction use a measure of inflation other than regional or statewide CPI?

Yes. Beginning with report-year 2004, a jurisdiction may use the Taxable Sales Deflator Index (TSDI), an indexed version of the Board of Equalization's statewide Taxable Sales Deflator (TSD).

11.  What are the measurement levels for default adjustment factors?

Population and taxable sales are measured at jurisdiction and countywide levels. Employment is measured at the countywide level. CPI is measured at regional and statewide levels.

12.  May a jurisdiction use different measurement levels for each factor?

Yes. For example, jurisdiction population may be used with countywide employment, jurisdiction taxable sales, and statewide CPI. However, the jurisdiction must use the same factor for base year and report year. For example, if the base year uses countywide employment, the report year must also use countywide employment that is determined using the same method used for the base year.

13.  How many different combinations of default adjustment factors are possible for the same diversion rate calculation?

Sixteen. For most jurisdictions, there are two measures each for population, employment, taxable sales, and CPI (2 x 2 x 2 x 2 = 16). Each combination may result in a different diversion rate.

14.  How may a jurisdiction choose between different combinations of adjustment factors?

Higher diversion rates result from the largest percentage increase in population, employment, and taxable sales, and the smallest percentage increase in inflation.

The Board’s website automatically selects default adjustment factors that yield the highest and lowest diversion rates. Using one or more alternative adjustment factors (not on the Board's website) may result in an even higher or lower diversion rate. Jurisdictions do not have to use adjustment factors that maximize or minimize the diversion rate.

15.  Is the jurisdiction measurement level more accurate than countywide?

Generally speaking, no. There is a greater likelihood of measurement error at the jurisdiction level than at the countywide level. Jurisdictions should select the adjustment factors that most closely represent changes in the jurisdiction.

16.  Are there situations where the adjustment method doesn’t work well?

Yes. It is less sensitive to changes in some economic sectors and/or activities that have less impact on taxable sales, employment, and population. For example:

• Disaster
• Military base closure
• Large construction and/or demolition project
• Large change in industrial sector

17.  Are there any other indicators that the adjustment method may not be working well?

Yes. The adjustment method may not work well if there is unequal percentage growth (from base year to report year) in population, employment, and inflation-adjusted taxable sales. Research indicates that the adjustment method may not be as accurate as the jurisdiction population and/or economy grow.

 18. What can a jurisdiction do if the adjustment method isn’t working well?

There are a variety of options and a jurisdiction may choose one or more:

Use the adjustment method and:

• Join a regional agency and use regional adjustment factors.
• Propose the Board approve jurisdiction correction of a substantially inaccurate base-year generation amount.
• Propose the Board approve a new base year.
• Request a Board finding of "Good Faith Effort" based on diversion program implementation.
• Request the Board approve jurisdiction substitution of more representative local measures of population, employment, taxable sales, and/or inflation.

Rather than use the adjustment method:

• Propose the Board approve a generation-based diversion rate analysis for a report year (estimate both disposal and diversion tonnage, then divide diversion tonnage by the sum of disposal and diversion tonnage).

19.  Does the adjustment method estimate residential waste generation the same way it estimates nonresidential waste generation?

No. The base-year waste generation amount is separated into residential and nonresidential amounts before population and economic change factors are used in the formula. While residential generation is strongly correlated with population, employment and inflation-adjusted taxable sales also have an impact. On the other hand, nonresidential generation is strongly correlated with employment and inflation-adjusted taxable sales, but not population. In short, economic change has more impact on nonresidential waste generation.

20.  Does the adjustment method correct base-year generation or report-year disposal amount problems?

No. The adjustment method estimates report-year waste generation. It heavily depends on a reasonably accurate base-year generation amount. Subsequent diversion rate calculations heavily depend on this estimated report-year generation and on a reasonably accurate report-year disposal amount. 

Problems with base-year generation or report-year disposal amounts, the two most important values in a diversion rate calculation, must be resolved separately. The Board's Base Year Generation and Goal Measurement Basic is an overview on the importance of an accurate base-year generation amount when estimating report-year generation and a diversion rate. The Board also has tools to help jurisdictions address inaccurate or outdated base-year amounts, and inaccurate report-year disposal amounts, at Board-Approved Disposal or Diversion Tonnage Modification Certification and Other Reporting Guidelines.

Last updated: January 09, 2008