This week Toronto city council will revisit the question of further garbage collection privatization despite evidence that suggests privatization politics don’t pass the sniff test.
Right now, the west side of Toronto has garbage collection privatization while the east side remains under complete public control. According to research, the status quo is better than more privatization.
An analysis of the City of Toronto’s current approach to garbage collection completed by city staff and corroborated by an Ernst & Young review — tabled September 22, 2015 — explicitly said: “the best value and lowest risk to the City of Toronto at this time is to continue with the current model.”
The 2015 evaluation concluded that the current garbage collection model delivers high value and service performance is effective. As Metro News columnist Matt Elliott wrote in a recent column, the 2015 review found that “on a per-household basis, the public-sector collection in Scarborough was cheaper than the private collection in Etobicoke. Based on this and the risk attached to contracting out all service, the report recommended sticking with the status quo.”
The Public Works and Infrastructure Committee decided at that September 2015 meeting to postpone a decision on this matter. Between now and then a new staff report was ordered and on January 18, 2017, it was tabled. The newly ordered report made headlines because it explicitly contradicts the old report’s conclusion, reflecting the mayor’s own view instead. Mayor John Tory is promoting further garbage collection privatization, starting with Scarborough. He claims it will save money.
So what to believe?
In 2015, the city’s report looked at garbage collection in 13 comparable North American cities, some of which are fully privatized, some partly, some entirely in public hands.
The conclusion: “Each model has its advantages and disadvantages. An advantage of the full public sector model is greater control over scope and quality of service, which may result in higher quality service, but this may conflict with pressures to limit tax and fee increases. A fully privatized collection service delivery model may have lower operating costs, but there are costs for the city in monitoring service and managing contracts. With fully privatized services, costs can increase over time through service changes during a contract or in future bidding, particularly with a reduction in competition.”
That’s similar to the findings in our own report, published in June 2015. Researcher David Campanella reviewed international econometric analyses of privatization and semi-privatization in waste collection in the U.S., the UK, the Netherlands, Spain, Sweden, Ireland, and Canada. Campanella concluded that there is no empirical evidence to support the claim that garbage collection privatization is necessarily more cost efficient.
Privatization can cost more in the end
In fact, Campanella observed that full garbage collection privatization can cause more headaches than it’s worth. A lack of competition in the garbage collection sector and large, often unaccounted for, administrative costs required to deal with private firms can end up costing governments more in the end.
From Campanella’s report: “What’s the number one reason U.S. city managers cite for reversing a decision to privatize services? Insufficient cost savings. In solid waste collection, studies reveal that any initial cost savings tend to diminish over time, and that cost savings have become increasingly less likely.”
Among Campanella’s findings:
- Lack of competition can undermine cost savings that initially might occur under a mixed model;
- A low number of bidders in a fully privatized system can increase the chance of collusion and decrease the chance of a low-cost bid;
- Municipalities have reported that they spend a lot of time and resources trying to stimulate and sustain what little competition there is in the market;
- Maintaining crews, equipment, and public institutional know-how signals to contracted firms that if they start acting opportunistically, there could be consequences.
The bottom line for Toronto city council: Fully privatizing garbage collection could cause more headaches, and cost more, than it’s worth.
For the record, the Canadian Centre for Policy Alternatives has long held that essential services such as hydro, water and sewage treatment, and garbage collection are always best under public control. When it comes to these services, the health and well-being of people should come before profits.
There is a good case for bringing garbage collection fully back under public control. For instance, environmental stewardship, like more ambitious waste diversion targets, is easier to do as a government when you’re not dealing with a consortium of private companies.
Garbage pickup is a vital community service that is essential to a clean and healthy city. Workers who provide this crucial service deserve to be paid a decent wage with benefits. By privatizing garbage collection, you encourage private companies to bid low in order to win the contract. Bidding low can result in inferior service or low-paid workers. Or both. Why would any government rush to erode the value of service and/or the value of work?
Privatizing the city’s garbage collection is becoming one of those perennial ‘groundhog day’ issues. It keeps coming up, year after year after year, despite the evidence. But garbage collection privatization politics aren’t passing the sniff test.
The city’s own staff in 2015 and our own independent review provide council with the evidence-based decision-marking it needs. In the absence of political leadership ready to take full public control over an essential service such as garbage collection, the current mixed model is better than the alternative of full privatization.
Trish Hennessy is the director of the Canadian Centre for Policy Alternatives’ Ontario office. Follow Trish on Twitter.