Cash for Trash?

Privatizing the City's Garbage Pickup

If this were a union town, labor leaders would have lined up in protest at city hall last month after Mayor Bruce Todd launched his crusade to privatize a variety of city services. But this isn't Cleveland or Detroit, where worker representation carries punch; this is Austin, Texas, where people like Willie Rhodes, the even-tempered director of the city-owned Solid Waste Services, spent the days following Todd's pitch putting a diplomatic spin on the prospect of losing his trash-collection turf to a private company. Competition, he said, would make his department work harder to provide the best value for the lowest buck.

While Rhodes tried to put the best face forward, worker advocate Barbara Rush of the American Federation of State, County, and Municipal Employees (AFSCME), bristled over Todd's streamlining scheme, which, if nothing else, got the mayor an awful lot of press. "Why is it," Rush asked, "that every time the mayor says we need to contract something out, all of a sudden we're in a state of emergency?" The mayor's aide, Trey Salinas, defended his boss' urgency -- an $18 million budget shortfall and an excess of warm bodies in mid-level management positions warrant getting lathered up about, he said. He added that of the areas Todd suggested putting out for bid -- trash collection, water and wastewater, health clinics, parks and maintenance, and the convention and visitors' bureau -- privatizing trash collection services generated the most favorable citizens' response in telephone calls to the mayor's office. "A lot of the callers complained about their trash not getting picked up," Salinas said.

The mayor's plug for privatization was roundly cheered by private waste companies in town. They've been clamoring for years for a piece of the city's lucrative garbage business. In fact, Waste Management Inc., and Browning-Ferris Industries (BFI) are still chapped about an incident three years ago -- something they describe as a lame attempt by the city to bid out a section of North Austin's trash-collection territory. The city's Solid Waste Services division came in with the low bid and walked off with the prize -- but not without the private companies crying foul and accusing the city's bidders of conveniently failing to figure significant costs into their proposal. In the end, the privates called the process a sham. The folks in Solid Waste called it sour grapes. Today, there's still pressure from the private sector to give the competitive bid process another go -- this time with a "fair and impartial" party reviewing the proposals.

In the three years since Austin's little bidding war over trash, the town has continued on its growth track, creating more waste business and recycling opportunities along the way. Most of the private hauling jobs here are in commercial accounts, and smaller municipal contracts outside Austin's city limits. Waste Management lays claim to about 35-40% of the local marketshare. The rest is divvied up among BFI, Austin-based Texas Disposal Systems, and Central Texas Refuse.

But the mayor's rallying cry for privatization, and the industry's boosterism of it, just doesn't sit well with Gail Vittori, a member and former chair of the city's Solid Waste Advisory Commission. "I think it would be a short-sighted move to privatize because we're getting such tremendous value out of the program we have in place," Vittori said, adding that her opposition is based on personal opinion and isn't reflective of the Commission. "The private sector throws out a lot of carrots alluding to the fact that they can do the job better and cheaper, but I don't know if they can offer the range of services that we have now. And then there's the accountability issue. Whether or not they would be responsive to the residents of the city of Austin -- that's an unknown."

Also, nobody on council is particularly enamored of the idea of putting city trash collectors out of work. "The people who collect our garbage are probably the most respected of all city employees, and I'm very concerned about their reaction to this," Councilmember Ronney Reynolds said gravely in an interview a week after Todd pushed for privatization. He added that Todd's so-called solution to the problem doesn't fully identify what the problem is in the first place. Of the 361.5 employees in solid waste, 219.5 of them are front-line workers. The rest include three top executives, 12 mid-level managers (who also walk a thin line where job security is concerned), and 27 "working" supervisors, most of whom are line-level employees. In all, the solid waste division runs a pretty lean operation, according to AFSCME's Rush. "What makes solid waste services so attractive is the fact that it's a revenue-generating department," she said.

The division operates as an enterprise that's funded largely by collection fees, landfill operations, and the sale of recycled material. Residents pay $13.64 (which includes a $2 anti-litter fee) plus a $0.97-cent sales tax per month. Despite Salinas' account of complaints over the city's garbage services, Austin's overall trash and recycling collection program generally gets good marks. From an industry perspective, the city is having a successful run of its Pay-As-You-Throw program, meaning most people have adjusted to having their garbage picked up once a week instead of twice. On the down side, residents feel cheated that they're paying more money for less collection service. Last year, the local daily wrote a stinging editorial to that effect, comparing Austin's rates and collection frequency to other Texas cities that bid out a portion of their garbage business to private companies.

What the American-Statesman failed to mention is that Dallas and Houston still don't offer curbside recycling to all residents and that Houston shelled out a whopping $10.5 million in 1994 to dispose of all the garbage it collected. Moreover, the trend nationally is to move to a once-a-week pickup schedule to encourage more recycling of household waste. Fort Worth may have twice-weekly service now, but a citizens committee has recommended (and city council has concurred) shifting to once per week. Some areas of Houston are also moving to weekly collection services.

The mayor's privatization proposal couldn't have come at a worse time for Rhodes, who plans to seek a residential fee increase for the new budget year. It goes without saying that his request stands a good chance of getting bulldozed by a rate-sensitive council. Rhodes says the proposed hike of maybe $1 is needed to offset the costs of the Pay-As-You-Throw program, and the soon-to-be expanded recycling program which will allow residents to toss into the bin all kinds of paper, including cereal boxes, and more varieties of plastic containers. Rhodes also has a big plan for stretching recycling services to the multi-family sector, a plan that's been on and off the drawing board for a number of years. He's keeping a tight lid on his plan for apartment complexes until he unveils his proposal before council on July 10 -- explaining that he doesn't want the councilmembers to read about it first in the papers. Rhodes may be expecting opposition on the council and in the industry for "meddling" with an area of recycling pick-up currently considered private territory.

There's another area where Rhodes is likely to face some tough opposition. He wants council to approve a "sticker" program in which residents will have to purchase special stickers for the overflow garbage sitting at curbside beside the trash container. The mere mention of stickers last year got local residents in a dither, so there's no telling what will happen this time around. But again, these "incentives" are designed to browbeat residents into recycling more to reduce the high cost of disposal once the city-owned landfill closes in 1999 (see sidebar).

Public vs. private is an age- old municipal quandary. The private sector touts its efficiency and cost-controls over the bunglings of bureaucracy; the public side usually counts as its strengths the issue of accountability and the little-known services provided that most people in Austin take for granted -- things like picking up dead animals, sweeping streets, cleaning up illegal dumps, and providing a place for residents to take their household hazardous wastes. But John Albert, president and general manager of Waste Management's Longhorn Disposal in Austin, said that private companies can provide those obscure services, too, provided the city's specifications call for that.

Municipal converts are being won over every day, as one new study points out. Of the more than 1,600 municipalities surveyed by R.W. Beck, a Seattle-based environmental consulting and engineering firm, about 11% said they were either planning or considering privatizing their trash collection services. The driving force behind the switch? Economics, said Jonathan Burgiel, the director of solid waste management services for the consulting firm.

Consultants can tout the economic benefits of the private sector, but the reviews on privatizing the public's garbage pickup are mixed, particularly around Texas. For instance, the fees -- private or no -- remain comparable. The difference between private and public management centers around the services provided, and even there, most private collectors are now going with a once-a-week pickup standard, variable rates, and recycling collection. One of the early pioneers to experiment with a privatized collection service, the City of Fort Worth, now contracts out 80% of its collection needs, more than any other Texas city. And Fort Worth's privatized recycling program is considered a Metroplex model of success; for now, residents pay $10.30 a month, which officials say is the lowest in the state for the amount of services offered. But as the city shifts into an expected once-a-week service, a variable rate payment system, and an expanded recycling program, the fee is likely to increase by anywhere between $2 and $4.

While privatization is the rule in Fort Worth, Dallas holds just as strongly to its conviction that garbage collection is best managed in-house, although the city does contract out 20% of its collection needs. Budget constraints have left Dallas less successful on the recycling front, however, and the city is just now gathering enough steam to begin taking its curbside collection operations citywide. Dallas is also moving into a fully automated system of garbage pickup, and for that residents will likely be asked to pay an additional $0.83, bringing the monthly fixed rate up to about $11.50. Besides El Paso, Austin is the only major city in Texas that has not privatized any of its collection services. Houston farms out 30% of its trash-hauling duties while San Antonio contracts out for 5%.

Elsewhere in the country, privatization is flourishing. The fair cities of Seattle, San Francisco, San Jose, and Boston lead the nation with 100% privatization of garbage and recycling services and once-per-week pickups, according to a survey the City of Houston released last summer. But if there's any correlation between privatization, cost, and service, it's hard to tell from the record. In Boston, garbage collection is paid out of the city's general fund, rather than through monthly fees, while monthly rates in Seattle vary from $6.25 to $48.28, depending on the size and number of containers used -- and the city is a leader in recycling, with a 40% reuse rate. In San Jose, a household is charged a monthly fee of either $13.95 for a 32-gallon container or $24.95 for a 64-gallon can, while San Francisco's rates range from $9.18 to $10.66.

Today, Austin is at a cross- roads: The landfill is on the verge of closing, the solid waste director wants to raise garbage fees, the mayor wants to privatize. And the waste companies, sensing a loosening of the reins at this juncture, are revving up their lobbying efforts like never before. Nabbing even a sliver of the city's collection business would make a nice wad of cash for any company. Hauling garbage, after all, is the most profitable component of the
$35 billion waste industry -- one that thrives on acquisitions and mergers and, in the case of Waste Management and Houston-based BFI, aggressive moves into public markets. Private companies beat their drums pretty soundly to make believers out of government entities -- and since politicians seem particularly in tune with that sound, the impulse at City Hall may be to dispose of another revenue-generating governmental function, just to lighten the load. n

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