Privatized Garbage Collection East of Yonge Is a Bad Deal For Taxpayer
Hamilton ran a three-year apples-to-apples comparison of public versus private garbage pick up. The result? Public garbage collection proved to be cheaper by about one million dollars per year.
By Humberto da Silva
The elections in Crazy Town are over and Toronto has a new mayor. This recent election was not about stopping a gravy train, but about getting any kind of train moving again. However, there was another issue featured at almost every mayoral debate: should garbage collection be contracted out east of Yonge Street?
Garbage collection was contracted out west of Yonge Street in 2012, ostensibly for cost savings, but the numbers are not yet in. Many researchers believe that roughly half of the promised savings have materialized in the early years of the contract. Normally, extra costs start to pile up, and service deteriorates as the contracts mature. We have to ask ourselves, is Toronto being penny wise and pound foolish when it comes to solid waste?
When the Toronto garbage contract went out to tender, two companies made bids—Turtle Island and Green for Life. Shortly after the contract was awarded to Green for Life, it promptly bought Turtle Island, raising the question of whether this was an actual competitive bidding process in the first place. If Toronto wants true—and effective—competition in the contracting process, it should be considering both private companies and public garbage pick-up service.
Private waste management companies have to make a profit to stay in business. In the garbage game, there are a few ways to keep your profits high: pay less, use less equipment, and charge for all extras. The profit for private garbage companies usually comes right out of workers' pockets. Private garbage employees make about 25 per cent less than municipal workers for doing one of the world's most dangerous jobs. Because of this, there is a very high staff turnover rate. Private waste management companies also tend to use fewer trucks, as these trucks can cost up to $350,000 each. In order to do the same amount of work with fewer trucks, these companies often pick up garbage outside of the times allowed by the City for this activity. There have been reports of garbage being picked up by a private contractor in Vaughan at 2 am. One of the most serious costs in private garbage contracts is for special pick-ups. If a weather event leads to the requirement for a special garbage pick-up, this can eat up the savings for any given year. In 2013, after the Toronto floods, Toronto municipal solid waste workers had to do special pick-ups west of Yonge to avoid the contractor's gouging the City for this extra work. One day of overtime pay for city workers ended up being a small fraction of this potential cost.
Contracting out garbage collection east of Yonge Street will also likely close the door on true competition. Once the City is out of the business of providing this service, it may be impossible for it to get back in. When the City contracts out a service, it normally sells off its surplus equipment at fire sale prices. Garbage trucks costing a quarter of a million dollars are often sold for as little as $15,000. This is a welcome bonus to the private contractors, but to get back into the business would mean buying hundreds of trucks at their full retail value—a huge expense for any city to incur. Also, international trade deals such as NAFTA and CETA might legally preclude the City from getting back into the garbage pick-up business. Any of the private garbage corporations might then sue the City of Toronto for lost future profits under one of those trade agreements. (Canada has already paid hundreds of millions of dollars to foreign corporations for their lost future profits under free-trade agreements.)
Municipal workers and the municipality itself are accountable to the citizens of Toronto. A private garbage company is accountable only to its owners or stockholders. Often when there is a complaint from a resident, the company will find it cheaper to pay a ridiculously low fine than to send a truck out to do a service call. Often, then, the City has to send out a municipal crew to clean up at the taxpayers' expense. And although private garbage companies could lease the City's transfer stations at very low cost, they never do. Private contractors are paid by the ton and weigh the garbage at their own transfer stations. So really, they can write their own cheques.
Hamilton actually ran a three-year, apples-to-apples comparison of public and private garbage pick-up. The public option proved to be cheaper by about one million dollars per year. In Toronto, the private companies want only to pick the low-hanging fruit—residential garbage. Public-sector workers will still have to pick up commercial garbage on major streets at night, garbage in the parks, and they will also have to do special pick-ups because these just aren't profitable. Similarly, the City of Toronto can contract out everything except its own liability. If a private garbage contract in Toronto becomes unprofitable for the contractor and the City refuses to pay for the extra costs, the contractor can just go bankrupt, leaving taxpayers holding the bag for whatever special arrangements might have to be made with another company.
So best to go with the advice of Jim Harmon, former general manager of solid waste for the City of Toronto. He publicly stated that 50/50 was actually the best-case scenario for solid waste. It keeps the public service on its toes, and it keeps the private contractors honest.