TEA study of privatizing waste shows savings overrated (May2011)

Look Before You Leap: An Environmental Perspective on Privatizing Waste Collection in Toronto

By Toronto Environmental Alliance

May 2011

Executive Summary

For almost 20 years, TEA has been fighting for waste diversion and reduction across Toronto. Today, Toronto has some of the most advanced waste diversion programs in the country. Currently, City Hall is debating whether to privatize waste collection services west of Yonge Street. 

TEA has spent the last few months researching the issue of waste diversion services and diversion rates, and how Toronto’s waste diversion goals might be impacted by contracting out waste collection for a significant portion of the City.

Our research has led to the following key findings:

• No applicable studies have examined whether privatization has a negative or positive impact on waste diversion rates;
• Significant evidence exists that waste diversion has been jeopardized by private waste collectors; it is unclear if this is a consequence of privatization, bad contract language, and/or insufficient monitoring;
• Studies have shown that proper monitoring costs about 20% of the contract value to ensure cities get what they paid for;
• City staff have seriously over-estimated the potential savings from privatizing waste collection west of Yonge Street because they have under-estimated monitoring costs.

On May 17th 2011, City Council will be considering a staff report from the Public Works and Infrastructure Committee. It recommends that Council immediately proceed with privatizing waste collection services and give staff authority on the final contract language and award. This would exclude Council from having direct oversight over contract language or the opportunity to review the final contract ($250 million and lasting 7+ years) before it is signed. The staff report provides no information about whether waste diversion is affected by privatization. It also under-estimates the monitoring costs for the contract, meaning the potential savings have been over-estimated by at least $4 million per year.

Based on our findings, TEA recommends City Council reject the staff recommendations and instead direct staff to:

• Get the facts about what impact privatizing collection could have on waste diversion rates by looking to other cities.
• Develop contract language that ensures the City is not penalized for making improvements to our diversion services or programs. This includes avoiding any ‘put-or-pay’ provisions for waste disposal that penalize us for reducing waste.
• Find the true cost to the City of properly monitoring private collection contracts.
• Propose a process that ensures City Council has direct oversight over contract language development and signs off on any contract before it is signed.
• Report back the above findings to the Public Works and Infrastructure Committee.