How privatization helped raise the bar in the solid waste field
Over the last 30 years the competition among waste services companies and municipal solid waste departments has grown in intensity. While the two sides maintain a competitive respect for each other, they both have learned that they must become better, faster, smarter and more cost-effective to win a municipal waste services or recycling contract.
Residents of cities and counties across the country have been the primary beneficiaries of this competition. Many have witnessed a dramatic improvement in the professionalism and the level of service they receive week in and week out from either the waste service company or government department that is collecting their trash and recyclables.
Industry Evolution The business that became the multi-million dollar waste services industry was originally limited to individuals who buried or burned the garbage that was generated by their families. Many “mom and pop” companies emerged to collect waste materials, and local governments subsequently organized their own solid waste departments to provide similar services.
Today, fewer than half of all local governments provide waste services to their residents through a government-operated solid waste department. Most local governments in the United States have opted to use a private waste services company to collect, process and dispose of their community’s waste and recyclables.
Other governments have fashioned a public/private “hybrid” of waste services, depending on their needs and market conditions. For example, Mesa, Ariz., population 350,000, provides some solid waste services itself but outsources others. In some cases, this is because the private sector has specialized equipment and expertise (laboratories to analyze and dispose of household hazardous wastes, for example) that would be too expensive for the city to provide on its own, says Mesa’s Solid Waste and Facilities Director Jack Friedline.
Local government officials across the country have begun contracting out their waste business in part because, unlike 10 or 15 years ago, cost-competitive professional services are readily available in nearly all parts of the country. Also, the whole perception of solid waste has changed from that of a liability to something from which municipalities can reap financial benefits – from selling recyclables or recovering and processing landfill methane gas, for example.
“In the last 10 years, Mesa has changed the way we handle and process solid waste dramatically,” Friedline says. “We have gone from picking up garbage and sending it to a landfill to looking at it sort of as a stream that we can pull things out of and do things with.”
In Virginia, which has seven regional solid waste authorities, the Southeastern Public Service Authority of Virginia (SPSA) was formed in the mid-1970s so communities could pool their resources to improve solid waste services. From SPSA’s formation until as recently as the late 1980s, private alternatives were few and far between, says John Hadfield, SPSA’s deputy executive director.
Nearly 15 years ago, in the absence of private competition, the SPSA’s six cities and two counties entered into a 30-year solid waste disposal contract with the authority, which also owns eight solid waste transfer stations as well as a waste-to-energy plant. The 30-year pact ensured a long-term, steady stream of revenue, enabling the authority to sell bonds to finance its projects.
Hadfield concedes that, in today’s market, it is highly unlikely that municipalities would enter into such a long-term contract. “By the early ’90s, we were seeing private landfills being constructed in Virginia,” Hadfield says. Now there are nine privately owned landfills in eastern Virginia, leading to excess capacity that has caused the private firms to drop their prices to compete for available volumes.
Still, when SPSA needed more landfill capacity recently, its evaluation determined that it would be cheaper over 13 years to spend $43 million to expand its own landfill rather than sign a disposal contract with a private landfill. The reason: The low bidder was located about 80 miles from the source of much of SPSA’s waste, meaning transportation would add costs to the proposal. SPSA began construction last month; completion of the new landfill cell is slated for August 1999. SPSA’s experience demonstrates that even highly competitive prices sometimes are not enough incentive for a municipality to change the way it provides solid waste services.
Municipalities Keep Pace Municipalities have pursued or seriously considered privatization largely because elected officials are discovering that constituent demand for enhanced or improved services has increased faster than the tax base. In many cases, officials have found that the private sector can provide improved or more cost-effective waste collection and disposal services with less risk and more long-term cost predictability.
In response, more and more municipal solid waste departments have risen to the challenge and are competing effectively with their private sector counterparts for solid waste and recycling contracts. “The private sector is running hard,” says Bill Wolpin, editor and publisher of World Wastes magazine. “Competition is unprecedented, and now it is even coming from the public sector. Squeezed by increasing demands and shrinking budgets, many of today’s public sector solid waste professionals have learned how to operate more efficiently, and in some cases these operations have competed along with the privates for their own city’s collection contract. I’d say that in the last year, the word ‘competition’ has entered the public sector waste professional’s vocabulary.”
In turn, all competition – whether from private companies or solid waste departments – benefits communities by lowering or holding the line on costs. Mesa has learned and benefited from its experiences with the private sector, Friedline says. “That competitive environment bleeds over into everything we do,” he says. “It becomes a culture.”
A Level Playing Field Today, the playing field for solid waste contracts is increasingly more level. From an operational standpoint, bidders have access to the same trucks and equipment, as well as increasingly more affordable technology like computers and sophisticated routing software. Therefore, less tangible criteria such as knowledge and experience may be the deciding factors in awarding a contract.
Local officials also must consider the scope of knowledge necessary for the provider to adequately serve the community. Those private sector firms with a wide client base bring to the table a thorough knowledge of the requirements necessary to operate in disparate regions, climates and geographies and can draw upon the lessons they have learned to address situations in any community.
Private sector firms can have an advantage in economies of scale and purchasing power – commanding the lowest prices for equipment because they purchase in large volume. Furthermore, the provider with the lowest acquisition and maintenance costs is likely to pass the savings on to the customer.
In addition to knowledge, experience and costs, local officials must consider the availability of a provider’s human and mechanical resources. Are there circumstances that could force a municipality to make additional workers and equipment available at a moment’s notice? Who will pick up the community’s garbage in case of a strike? In the wake of a natural disaster, how will the cleanup be completed? In some instances, large private sector providers may be better able to mobilize additional equipment, drivers, administrative support and supervisory support in response to a strike or disaster.
Still, Hadfield maintains that the private sector has disadvantages, too, including the need to earn a profit, which he says could lessen the price advantage. Moreover, private sector firms must pay taxes and generally cannot borrow money at rates as low as local governments can.
A Fair Evaluation To make a fair comparison of proposals for waste services, cities and counties should employ full cost accounting rather than “fund” accounting. Full cost accounting breaks out all costs related to waste services and allows department heads, city council members and residents to evaluate them. The EPA defines full cost accounting as a systematic approach for identifying, summing and reporting the actual cost of solid waste management, such as past and future outlays, overhead costs, operating costs, capital depreciation and reserves.
Once full cost accounting is implemented and the government’s true cost of waste services is established, elected and appointed officials and taxpayers can compare the true price tag against what the private sector would charge for the same services. After the contract is awarded, it is imperative for elected officials to hold the winner to the standards that were outlined during the bid process; they must have procedures in place to monitor performance and hold the provider accountable for meeting the specifications – at bid price – throughout the contract term.
Government officials should never feel that once the contract is awarded there is no recourse available to them if the performance does not meet the requirements specified in the contract. To avoid such a scenario, officials should require winning proposals to contain language that addresses contingency plans. They may also demand that performance bonds be in place in case of non-performance.
Officials also must be prepared to address cost overruns. If private companies find their costs come in higher than was projected, the contract language usually requires the company to absorb those overruns. However, if the government’s waste services department costs exceed its bid price, the local government may end up absorbing the loss and taking funds from other programs to cover the overruns.
A number of cities and counties have found that the most effective formula for providing waste services is a team combining the talents of the public sector and private industry. Several communities have combined forces with private sector companies to provide an innovative waste services solution.
Mesa is a good example. City employees collect garbage and “co-mingled” recyclables (aluminum and tin cans, glass, cardboard, newspapers and magazines), but a private firm sorts and sells the recycled materials. The city also takes its garbage to a privately run Subtitle D landfill located on a nearby Indian reservation.
Finally, while city employees participate in household hazardous waste collection days, a private laboratory analyzes and disposes of the collected waste materials. “We are not experts at handling hazardous wastes, and we don’t want to be,” Friedline says.
Competition Benefits Everyone Competition for municipal waste services contracts brings out the best in the private sector and municipal solid waste departments. With each RFP the bar is raised.
Although some cities have successfully turned everything over to the private sector, Friedline says he is not comfortable with that approach. He adds that what works well for one municipality may not work at all for another. “You’ve got to look at the circumstances unique to your region – where you are with reference to your solid waste program,” he says. “You evaluate each and every task you do and determine [who] is going to give you the service levels that your customers demand.”
Ultimately, elected officials need to remember just a few key points to make competition work to the benefit of their constituents. First, the best competition occurs when there is a level playing field, meaning all parties must be held to the same standards during the bidding process and after the award. Second, if the government and a private sector firm are providing the service jointly, mutual respect and cooperation are essential for the partnership to work well.
If either party feels the other is not being held to the same performance requirements, or if cooperation and communication are not open and professional, then conditions do not exist for the best possible partnership. Public officials must monitor these partnerships, ensuring that impartial processes are in place to promote a fair and positive environment for all concerned.
Christi Clark is the corporate director of public sector marketing and sales for Houston-based Browning-Ferris Industries.
Smokestacks and gasoline-powered vehicles are not the only contributors to the “greenhouse effect” and suspected global warming. Solid waste landfills, because of the methane gases they emit, also play a major role.
According to EPA, each pound of landfill-emitted methane is about 25 times more effective at trapping radiation in the atmosphere than a pound of carbon dioxide. Recovering methane from landfills reduces radiation buildup, odor and smog while capturing the gas’s energy value. Nevertheless, fewer than 20 percent of the landfills that could do so have established methane recovery programs.
EPA’s Landfill Methane Outreach Program (LMOP), introduced in late 1994, is now entering Phase II, which will identify appropriate sites for methane recovery. It will assist cities and counties in identifying barriers to gas-to-energy projects at landfills and addressing the barriers by bringing together such entities as utilities, landfills and trade associations in partnerships.
Local governments can turn methane gas into an asset, either using it themselves or selling it as a boiler fuel for buildings or industrial plants. In addition to generating revenues, methane recovery may reduce the government’s fuel costs and create jobs related to the methane recovery project.
Nationwide, more than 150 are participating in EPA’s LMOP. Greensboro, N.C., and Ann Arbor, Mich., are among the participating communities. Greensboro has teamed with Charlotte, N.C.-based Duke Engineering & Services to sell methane from its White Street Landfill. The gas is used by Cone Mills Corp., Greensboro, to power a 70,000-pound steam boiler in its denim plant.
Ann Arbor is cooperating with Wixom, Mich.-based Landfill Energy Systems, which is constructing a power station, and electric utility Detroit Edison, which will purchase the electricity. Ann Arbor also has opened a Materials Recovery Facility Education Center that features a colorful mural designed as a “walk-through” landfill, depicting the landfill and its gas collection system. Tours are given to students and other interested groups.
In addition to fostering partnerships among various public and private sector entities, LMOP offers numerous free services and resources. They include technical information and software to assess project options and economics; assistance in locating energy customers, project partners and financial support; and a network of experts from the landfill gas industry and local communities.
LMOP also helps educate the public about the benefits of harnessing landfill methane. A free poster with the heading, “Look Who’s Energizing Our Community” touts the benefits of landfill gas-to-energy projects. Available in electronic form, the poster can be adapted to various uses including fliers and brochures. A “marketing and promotion primer” that includes brochures, press releases and sample advertisements also is available to help landfill operators market to prospective methane gas purchasers.
Assistance with regulatory compliance is available, too. A free handbook, the Guidance Document for State and Local Permit Writers, serves as a step-by-step guide to implementing gas-to-energy projects and helping municipalities issue permits effectively and in accordance with the EPA’s New Source Performance Standards.
For more information on the Landfill Methane Outreach Program, call (888) 782-7937, or visit the program’s web page: http://www.epa.gov/lmop.html.
In 1996, an estimated 36 billion aluminum cans with a scrap value of more than $600 million were disposed of in U.S. landfills, according to the Washington, D.C.-based Container Recycling Institute. “We are literally throwing money away when we don’t reclaim valuable resources,” says Pat Franklin, the institute’s executive director.
Despite increased access to recycling programs, recycling has not grown, Franklin says. In 1992, when 78 million Americans had access to curbside recycling, 63 billion aluminum cans were recycled. Four years later, when 121 million Americans had access, the same number of cans was recycled.
But the news is not all bad for recycling advocates. Their movement may get a shot in the arm with Vermont Sen. Jim Jeffords’ National Beverage Container Reuse and Recycling Act (S215). The bill would mandate that in states not recycling at least 70 percent of their beverage containers, consumers would pay a 10-cent point-of-purchase deposit on cans and bottles.
Of the 10 states that already have a mandatory beverage container deposit law, eight have achieved an average recycling rate of 85 percent. Moreover, a study by the EPA found that those 10 states are recycling more tons of beverage containers than are the other 40 states combined.
“We are constantly reminded of the growing problem of excess waste as we hear news reports of waste washing up on our nation’s beaches, pitched battles over the siting of landfills and communities lacking adequate waste disposal facilities,” Jeffords says. “Recycling aluminum cans and other containers saves energy, conserves resources, creates jobs and decreases the generation of waste.”
Franklin applauds Jeffords’ bill as a necessary step. “The 5- or 10-cent incentive keeps bottles and cans off streets and beaches and out of landfills,” she says. Legislation probably could be avoided if the beer and soft drink industries would implement voluntary deposits, she says, adding that such a program would need to boost the recycling rate for aluminum, glass and plastic containers above 85 percent.
In the House, Maine Rep. Tom Allen has introduced the National Beverage Container Recycling Initiative Act, a companion bill that would effectively nationalize Maine’s beverage container law. That law requires a 5-cent deposit on containers for beer, soft drinks, tea, sports drinks, juices and bottled water. Wine and liquor containers would have a 15-cent deposit.
Both the Senate and House bills call for a 2-cent-per-container handling fee to be paid to retailers for their participation in the program. Also, they stipulate that unclaimed deposits be earmarked for state environmental programs.
This article was written by Lori Beaver, an editorial intern for Intertec Publishing, Atlanta.
The policy of burying virtually all solid waste in landfills is about to come to an end in South Georgia. With the christening of the Crisp County Integrated Waste Processing site in Cordele, about 87 percent of the waste stream generated from 37 government jurisdictions will be segregated, processed and reused. The remaining 13 percent will be baled and placed in an on-site balefill.
This regional initiative began five years ago when an Atlanta-based solid waste consulting and management firm approached Crisp County officials with an idea for processing and recycling household waste. The company was looking for a likely site to implement a program that would significantly reduce the amount of an area’s household waste being landfilled.
After several months of discussions and public hearings, county officials adopted the company’s proposal to build the integrated processing site. Officials from the company and county sold the idea of a regional facility to local governments throughout south Georgia. The plant will receive waste from cities up to 100 miles away.
Once company and county officials had determined the number and locations of downstream users of the recyclables and signed waste stream suppliers to long-term contracts, construction of the $53 million facility started last year. While work proceeds on the various processing buildings, the Crisp County Public Works Department is installing the Subtitle D landfill on an adjacent lot where the non-recyclables ultimately will be baled and buried.
When the project is completed this March, up to 1,700 tons of waste can be processed daily at the site. That amount may be large enough to hasten the closing of 16 landfills in South Georgia.
Owned by Crisp County Solid Waste Authority, the facility was designed and outfitted by Atlanta-based Wastech Equipment. The county awarded a five-year management contract to Atlanta-based Municipal Waste Management, the consulting/management firm that had first proposed the project.
“Solid waste doesn’t have to be a dirty and costly endeavor,” says Sally Dunn, executive director of the Cordele-Crisp Industrial Development Council. “One person’s trash can be another person’s treasure, and this facility will be showcased to people from all over the country who will want to understand how solid waste should and will be handled in the future.”
Crisp County Administrator Bill Goff, general manager of the facility, says the balefill will double the life of the landfill and significantly reduce seepage of hazardous materials into one of the Southeast’s largest aquifers. “This has a significant impact on the quality of water in underground recharge areas,” Goff says. “This facility will help clean up the waste stream.”
South Georgia also will benefit from a 9-acre, roofed composting area to be constructed as part of the project. Once operational, the composting facility may be commercially available for farmers.
An estimated 206 finished tons of compost and 190 tons of aggregate and ground cover will be processed each day. The 54-acre site will serve 17,000 square miles of territory with five transfer stations and will employ about 165 people.
Creative financing and resourceful engineering set the stage for groundbreaking at the largest ever multi-county, publicly served landfill project near Aiken, S.C. Initiated by a nine-county consortium, the 1,400-acre, $21.5 million landfill is expected to save member counties as much as $2 million annually and provide municipal solid waste services for at least 50 years.
Located at the Savannah River Site, the project will be managed by the Three Rivers Solid Waste Authority (TRA), a nine-county entity formed in 1992 for the exclusive purpose of solving municipal solid waste problems. Member counties include Aiken, Allendale, Barnwell, Bamberg, Calhoun, Edgefield, McCormick, Orangeburg, and Saluda.
TRA Projects Director Colin Covington says his organization allows elected officials in member organizations to set policy for solid waste disposal and to exercise some control over its increasing costs.
Funding a project the size of the Three Rivers landfill required TRA officials to consider nontraditional money-raising concepts. Typically, local governments raise money by issuing interest-bearing bonds or zero coupon bonds.
But because these methods would not provide enough capital to finance such a large project, TRA financial experts looked into “super sinker” bonds, a once-popular investment strategy used to finance housing deals. These bonds have a term maturity investment that allows for unlimited prepayments, usually with no penalty, if the borrower’s cash flow exceeds original expectations.
Investors Benefit The benefit to investors is that the bonds offer long-term interest rates on what is essentially a short-term security. In the case of South Carolina, the bond revenue depends on how quickly the landfill fills up with trash.
When the TRA approved a $21.5 million bond issue in April 1997, it already had received more than $30 million in orders and thus was able to set the bonds at a 5.30 percent coupon, priced to yield 5.85 percent, at a time when other bonds that day went for 6 percent or more.
The benefits to the multi-county landfill effort are many. Chances are a super sinker bond will be redeemed in its entirety well before the stated maturity date.
For instance, if municipal waste comes in slowly – 150,000 tons per year – the counties will have 30 years to pay off the bonds. The tipping fee would remain about $23 a ton in current dollars, including transportation, and the total debt service would be $45 million. More than likely, however, the waste will come in much quicker – perhaps 300,000 tons per year – thereby allowing $9.8 million in super sinker bonds to be paid off in only seven years at no penalty.
The tipping fee, which will start at around $20 per ton, could increase after the super sinker has been paid off, reducing the total debt service and saving the counties millions in interest. The counties might never have to borrow again to finance development of additional landfill cells.
In the meantime, surveyors and engineers from Piedmont Olsen Hensley, Greenville, S.C., began construction on the regional Subtitle D landfill and solid waste technology center at the Savannah River Site. The landfill is designed to handle an average of 908 metric tons per day and a maximum of 1,816 metric tons per day of municipal solid waste.
The engineering firm was charged with readying the massive landfill for opening by this April. Engineers used TerraModel 3D terrain modeling software from Atlanta-based Plus 3 Software, to gather and manipulate data from field surveys and aerial photographs.
The software helped the design team determine how much dirt needed to be removed and aided with design of the proposed feature top, plastic layer linings and drain system. The system also provided a key analysis and simulation tool for TRA officials seeking assurances about how much trash each cell could handle.
Design accuracy crucial Accuracy in the design of the individual cells is an absolute necessity. The proposed 300-acre disposal cell areas are intended to encompass roughly rectangular-shaped, above-and-below-grade cells/pits of about 15 to 33 acres.
The first liner is a composite consisting of a 24-inch clay barrier soil layer overlain by a nominal 60-ml. high density polyethylene geo-membrane liner. This is topped by a geocomposite designed to improve drainage, and a 24-inch, sand protective cover.
A piping system is installed in each cell so that leachate is collected in sumps where it can be pumped to an on-site treatment facility. The final cover is designed to enable the safe collection of gases and their subsequent venting, without the danger of explosion or destruction of cover vegetation.
In addition to overseeing landfill operations, the TRA will manage a solid waste technology center at the Savannah River Site to promote solid waste reduction; design and test reuse and recycling technologies; and develop new ideas in conjunction with the private sector. TRA will continue to accept new members, according to Covington.