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Chapter Summary

Savas, E. S., ed. 1992. Privatization for New York: Competing for a Better Future. The Lauder Report; A report of the NYS Senate Advisory Commission on Privatization. New York.

Chapter 8: Solid Waste Management (Barbara J. Stevens)

Municipal solid waste (MSW) is defined as the materials discarded by household, business, and institutions (not include industrial process waste). The process of handling MSW includes collection, disposal, and processing. There are four types of arrangements for MSW collection:

  1. Municipal: city employees, paid by government entity
  2. Contract: provided by a private firm selected by local jurisdiction, paid by the local jurisdiction
  3. Franchise: provide by a private firm selected by local jurisdiction, customers are billed directly for service, price determined by the community
  4. Private: provided by a private firm, licensed by local jurisdiction, customers are billed directly, price determined by market

Collection Arrangements in New York State

  • Residential service (% of cities): municipal (54%), private (42%), contracts (4%), franchise (0%). [U.S. as a whole: municipal (33%), private (37%),contracts (23%), franchise (8%)]
  • Commercial service (% of cities): municipal (25%), private (71%), contracts (4%), franchise (0%). [U.S. as a whole: municipal (16%), private (59%), contracts (15%), franchise (8%)]

Processing and Disposal Arrangements in New York State

  • Landfill: Public ownership and public operation (82%), private ownership and operation (18%). However, with respect to permitted landfills: public ownership and public operation (26%), private ownership and operation (74%)
  • Incineration: public ownership and public operation (15%), public ownership and private operation (23%), private ownership and operation (62%)
  • Material Recovery facilities (MRF's): public ownership and public operation (38%), public ownership and private operation (28%), private ownership and operation (34%) (MRF's are less dominated by the private sector than is incineration.)

Estimated Savings from Contracting Collection

Contracting and franchises with exclusive territory are most efficient, with costs that are 22% - 25% less than municipal collection. In New York, fewer than 1% of arrangements are exclusive contracts. If New York City used private contracts or franchises, 25% would be saved in residential service ($70 million annually) and costs would be reduced by 10% in commercial service ($62 million annually). In New York State, $60 million in residential service and $34 million in commercial service would be saved by contracts and franchises annually. Disposal and processing are also less costly when privatized than when operated by the public sector.

Responses to Concerns About Privatization

Anti-competitive behavior: Some fear that private sector firms will increase price once they have procured a contract, "when they've got us over a barrel." Proponents argue that this can prevented by a properly constructed procurement.

Environmental problems: It is also feared that private firms would not satisfy environmental regulations for solid waste disposal; for example, they may attempt to dump illegal wastes at landfills. This possibility would be eliminated by careful prequalification of the firm and its principals, based on legal records.

Inflexibility: With regard to recycling, it is noted that it may be preferable not to contract with private firms for a long period, because it is not certain how soon the economics of recycling will develop. On the other hand, proponents believe that flexibility can be acquired through a flexible contract.

Service disruption: There is a concern that private firms are apt to abruptly cease service delivery, leaving municipalities without vital services. Proponents argue that there has recently been no example of such case, despite the thousands of contracts in effect.

Low-quality services: Some fear that private firms would provide lower-quality services compared to public sector. However, proponents point out that "a national study found that private collection received the highest ranking, with 93% of customers ranking it as good or excellent, followed by municipal service with a good or excellent ranking from 90 percent of respondents, and contract service, with a good or excellent ranking from 89 percent of customers."

Loss of control: Some argue that under privatization jurisdictions will not have control over equipment, manpower, or resources, so they will be unable to act when problems arise. But proponents argue that this fear can be eased by careful preparation of a procurement document and by discussions with officials who have successful experience with privatization in solid waste collection, disposal, and recycling.

Examples of Successful Privatization

  • Fort Worth and Newark: By means of contract, Fort Worth saved 36% (or $861,000 per year) and Newark realized savings of 18%.
  • Seattle, Washington: Seattle realized a $1 million savings on refuse collection by enhancing competition among private firms.
  • Town of Babylon, New York: Service levels increased with no increase in cost through a change from a private arrangement to a contract arrangement.
  • Rochester, New York: A comparative analysis between Rochester and Utica, which had similar circumstances, shows that contract employees collected more than five times as much waste per worker as did the municipal employees. In order to prevent the awarding of the contract to a private firm, the citys labor union agreed to change its work practices, which more than doubled the output per crew.

Implementing Privatization

To succeed in privatization of solid waste services, first, competition among private firms must be generated. Second, appropriate governmental involvement is needed to regulate the rate charged by disposal facilities in order to make entry easy. In addition, if there is local opposition to siting a new facility, the government must regulate this sector in order to prevent an existing private owner from having monopoly power. Labor concerns about privatization can be allayed by measures such as no-layoff policies.