Smell that? It's the stink rising from the mayor's office over plans to privatize garbage. Ford and co. are threatening to sic tough-guy former chief of staff Nick Kouvalis on city unions if they won't come quietly on this one. The messier truth for City Hall garbage privateers is that contracting out doesn't add up to savings. A look beyond the bottom line: 10 reasons why private garbage is a trashy idea.
1. It's not necessarily cheaper to privatize.
Much has been made of a C.D. Howe report suggesting Toronto would save $49 million if it contracted out garbage. It's more complicated than that. The report makes clear that cost savings depend largely on how contracts are written. For example, Edmonton, which privatized half its garbage collection, has one of the highest total annual waste costs per resident ($135) in the country. Vancouver and Calgary, meanwhile, both of which have public waste collection, enjoy some of the lowest costs ($92 and $71 per resident respectively).
2. The long-term costs are higher.
The industry is dominated by a handful of companies in Ontario, which makes it one of the most concentrated markets in North America. Private collectors hired in some jurisdictions have simply kept jacking their fees, knowing that there's no competition to challenge them for the contract. Can you say price fixing? Collusion? It's happened in the U.S. and Europe, resulting in huge payouts in class action suits. In Winnipeg, the Competition Bureau intervened in 97 to change contract length and renewal terms offered by commercial solid waste companies that the bureau said stymied competitiveness.
3. It's a myth that private companies provide better municipal services than unionized public employees.
In the U.S. and UK, public employees unions have won between 70 and 90 per cent of contracts openly tendered. In fact, during the last decade U.S. cities have been contracting work back at a faster rate than they've been contracting out.
4. There are huge human costs associated with privatization.
Workers employed by private garbage firms are paid much less than public employees, some 30 per cent less by one estimate - and that's without benefits. How does laying off workers, taking away part of their safety net and replacing them with lower-paid employees help the local economy again?
5. The unknowns are many and potentially pricey.
Any contract to privatize garbage collection will have to set specific targets and be highly structured and monitored constantly to ensure Toronto's financial interests are protected and service goals are being met. At least we hope that would be the case. Will any part of our waste infrastructure (see sidebar), for example, be given over for private control? In other jurisdictions, the haste to privatize has ended in huge asset losses. North Vancouver found itself spending millions on a new fleet of garbage trucks after it decided to bring garbage collection back in house.
6. Existing union contracts will have to be broken.
That is, if Ford and co. don't want to be stuck with reassigning hundreds of waste services employees to other city departments, which will mean no savings at all. To get around that detail in the current collective bargaining agreement, the suggestion has been floated that the move to privatization will be incremental, occurring over time in different parts of the city. Sounds like an administrative disaster waiting to happen.
7. Important public policy initiatives like recycling and waste diversion programs may get lost in the privatization mix.
Toronto has set ambitious waste diversion goals. Any contract the city signs will have to be loaded with conditions to meet future diversion commitments. Unless, of course, the plan is to cut diversion efforts, which has been a consequence of private contracts in some jurisdictions.
8. Privatization may end up adding to deficit woes.
That's especially so if selling off waste-related assets like garbage trucks, recycling facilities and landfills, for example, is part of Ford's plan. Simply selling assets to pay off debt does not improve Toronto's debt position. Losing valuable assets leaves the city poorer.
9. The city's waste management department is a revenue generator.
The department generates tens of millions in revenue from user and dumping fees and the sale of recyclable material. The department is a pretty tightly run ship, achieving more than $20 million in savings - some 6.7 per cent compared to the 5 per cent reduction target asked of city departments in this budget cycle - without any reduction in service levels. Customer service complaints are much lower than in Ontario cities with private collection. The department has 80 fewer employees today than the 1,421 at its high-water mark in 2006.
10. Privatizing is not about getting around work stoppages.
The idea that contracting out public services is desirable to get around work stoppages is a ruse. In fact, the incidence of municipal strikes nationwide has been on the decline since 2000 to fewer than 10 a year from 29 a year between 79 and 2000. The rush to privatize is not driven by economics or the public interest. It's being pushed by the hunger for short-term profits. And we all know where the public usually ends up in that equation.