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Reason Foundation

Investors Business Daily

Garbage Mess: Private Sector is Cleaning Up

Private landfill management grows

Geoffrey Segal
September 12, 2000

Remember the "garbage crisis" of the 1980's, when the forlorn garbage barge, full of New York city�s trash, cruised up and down the East Coast looking for somewhere to dump its load. While it littered the headlines a decade ago, you hardly hear about it anymore. In fact, the "crisis" of insufficient landfills went away, almost unnoticed, and the nation now has more landfill space than ever before. Thanks to a government program? Nope. In addition to recycling programs, a factor that played a significant role in addressing this crisis was that the private sector got into the business of running solid-waste disposal facilities.

Private sector landfill management has dramatically improved the efficiency of landfill operations, lessened their environmental impact, and saved cities countless amounts of money in the process. However, a handful of governors want to derail this move in a classic NIMBY (Not In My Back Yard) move, by re-initiating "flow control", the placement of limitations on the interstate trade of trash.

Over the last decade, city and county governments have turned over their solid-waste operations to private companies at a vigorous pace. According to a recent survey by solid-waste consulting firm, R.W. Beck, 27 percent of municipalities with populations greater than 100,000 are considering privatizing their landfill. Another survey showed that more than half (17) of the nations 30 largest cities have already privatized their landfills, and two others contract out their landfill operations.

But why the sudden change? What gives the landfill industry the edge that lets it grow so fast? A major contributing factor is that private firms are much better situated to address the regulatory and financial challenges of the modern solid-waste industry.

In 1976 federal regulations were established to minimize environmental impacts of landfill operation. But two results of these regulations have been rising landfill costs and the closure of "unfit" sites—mostly thousands of small government-owned landfills. This dramatic increase in capital and operational costs of solid-waste disposal made larger, regional "megafills" more cost effective and accelerated privatization.

While larger landfills are more environmentally friendly because of the reduction in the amount of smaller sites, they also cost a great deal more money to build. This is a difficult hurdle for local governments to overcome; however, a solid waste company can finance the megafill, find an acceptable location, and build and operate it serving any willing governments in the region.

Private companies are interested in profit and focus a great deal of attention on efforts to reduce costs, and thus, improve efficiency. Private companies can also raise capital more easily than local governments, without the use of unpopular taxes to raise revenue. Finally, private landfills are held to a higher standard of environmental regulations than local governments. And municipal and county contracts hold landfill operating companies accountable for inadequate performance.

By privatizing operations, government officials become consumers, shopping around for the best price and service. Contracts set service and performance standards, often giving them more control than they typically have over their civil-service employees. Privatization also helps cities cut costs, eliminate debts, and reduce their risk of liability. All of these conditions created fertile ground for the privatization revolution we are now witnessing.

Despite the many benefits of landfill privatization, the revolution is not without critics. In the 1980's, private sector participation was threatened by "flow control", or local government requirements that all trash in a jurisdiction go to government facilities. Eventually flow control was struck down by the Supreme Court the trash trade was protected by the Commerce Clause of the Constitution. Even so, several governors from trash-importing states are lobbying Congress to implement a new version of flow control, which would limit the 'flow' of trash across state lines.

Virginia Governor, James Gilmore, is leading the charge for flow control. Virginia, the second largest trash importer, receives most of its imports from New York. Recently, more and more trash has been diverted from NYC's Fresh Kills Landfill, which is set to close. To solve the impending environmental situation, NYC has invested in a series of transfer stations, to haul waste across the eastern seaboard. Flow control places these and similar efforts around the country in jeopardy.

But this isn't just a New York issue. Cities and counties around the country rely on importing and exporting trash, often utilizing the private sector. In fact 49 states export and 45 states import municipal solid waste. Since 1990 interstate shipments of waste have increased 30 percent, during which time real disposal costs have fallen. If advocates of flow control have their way, these gains may be lost.

We should savor and embrace the market for trash. Governors already have vast regulatory authority to control and prevent any negative impacts of landfills. Congress needs to see flow control for what it is, NIMBYism. If advocates of flow control succeed, the sure results will be less competition and higher prices. More important, the environmental and efficiency gains that competition and landfill privatization ushered in may blow away like a plastic bag in the wind.

Geoffrey Segal is director of privatization and government reform at Reason Foundation



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