The Globe Essay

Free the garbage hostages

Private collection is often, but not always, best; it's monopoly that needs trashing

Ben Dachis

Toronto — Policy analyst, C.D. Howe Institute Last updated on Friday, Jul. 17, 2009 11:25PM EDT

For most of us, garbage is best out of sight and out of mind. But seeing and smelling garbage
piled up in homes and on the streets because of municipal strikes in Windsor, Ont., and
Toronto reminds us that trash removal is an essential part of modern city life – which raises
the question why modern city life should be paralyzed by strikes.

This summer has seen a mini-revival of labour unrest, with continuing strikes by Windsor and
Toronto municipal staff, of whom garbage workers are only one part, by paramedics in British
Columbia, as well as a narrowly averted walkout by Ontario liquor-store workers. This follows
on the heels of lengthy strikes by Ottawa public transit and York University. This rash of
strikes is notable partly because work stoppages have become so rare. The late 1970s saw
more than 1,000 strikes a year across Canada; this decade the average is less than 200 a
year, with even fewer major strikes. But they are also notable because they affect key
services that – at least in the short run – are hard to replace. Unionized city workers off the
job mean closed pools, cancelled programs and garbage stinking in the summer heat.

Municipal strikes halted garbage collection in Regina in 2005, Vancouver in 2007 and Toronto
twice in the last decade. Almost always in summer (who wants to picket in winter?), the
average municipal strike is more than two months long. It will be no surprise if residents of
Toronto suffer as long as their fellow Canadians in Vancouver did for almost three months; in
Windsor, the strike has now lasted even longer than that.

What makes these service stoppages all the more irritating is that they are unnecessary.
Elected politicians can – if they have the nerve – remove the conditions that foster them. Only
where cities operate a unionized public monopoly on garbage pickup are city residents
potential hostages to a strike vote. And there is no good reason for these monopolies to exist.

Canadians do not like monopolies in the private sector – indeed, governments have myriad
laws and regulations to prevent them from forming, and to break them up if they do. Applying
the same thinking to municipal garbage pickup, with a few simple changes to how our cities
work, would help prevent lengthy garbage strikes and lower costs for taxpayers.

Until a few months ago, Calgary was the only major Canadian city without municipal curbside
recycling pickup. Small, private companies filled that gap by picking up recycling from their
customers' homes. Now, almost all of these small enterprises are facing bankruptcy, after the
City of Calgary's heavy-footed entry into the recycling business.

When the City of Calgary decided to start its own recycling program for single-family homes
this spring, it gave outside contractors a chance to bid. But both large and small recycling
companies claimed that the request for proposals had problems, ranging from excessive
insurance and bonding requirements to terms that gave the city the right to arbitrarily cancel
the contract. In the end, only one company put in a bid, and Calgary eventually awarded itself
the contract to serve the entire city.

Calgary will now have both single-family residential garbage and recycling pickup done
exclusively by public employees, going farther down the road to public monopoly than even
Toronto, which still contracts out segments of its residential garbage and recycling pickup;
soon before Toronto was amalgamated, Etobicoke contracted out residential collection in
1995, after a strike, and is still benefiting now.

PUBLIC AND PRIVATE CAN COMPETE

Researchers from the Local Government Institute at the University of Victoria found that most
Canadian cities, over the whole range of sizes, contract out municipal recycling pickup to
private companies: around 80 per cent. As for solid waste, between 67 and 80 per cent of
medium-sized cities (under 50,000 people) contract out pickup.

Larger cities are slightly less likely to use private garbage collection: only about 50 to 60 per
cent have contracted out their residential solid waste pickup. Cities such as Vancouver,
Calgary, and Toronto have public employees hauling most residential garbage. On the other
hand, multiresidential and commercial waste pickup – often paid for by fees for service, rather
than taxes – is almost always private.

Half of Edmonton's garbage is picked up by contractors, Winnipeg contracted out garbage

pickup in 2005 and Ottawa contracted out most pickup in 1999.

Overall, Canadian cities with privatized garbage service have a per-household cost that is
about 20 per cent less than publicly operated services. When public crews work in the same
city as contracted crews, the contractors cost less and serve many more households per
worker.

The small recycling firms in Calgary are suing the city for taking their business away. The
city's “fairness adviser,” however, has declared that the contract was awarded properly. But
whether the recyclers are compensated or not, the people of Calgary are likely to be the real
losers as a result of a public monopoly that will likely lead to higher costs and possibly leave
city services at the mercy of a union strike vote.

VITAL TENSION

The evidence from around the world shows that private companies and public unions have
essentially the same costs when the two are competing head-to-head. But when the public
sector does not have to compete with the private sector, the costs are higher.

The world leaders in contracting out garbage service are not, as one might expect, in the
United States, where perhaps half of cities contract out collection, but in social-democratic
Europe: upwards of 80 per cent of Danish garbage collection is contracted out and 60 per cent
of Swedish garbage pickup is done privately.

Of course, privatizations sometimes go wrong. A key benefit of privatization is that the

supervisor and the provider of the service are no longer one and the same. That tension, and
the accountability that goes with it, are vital. But governments can become complacent about
their contracting, returning as if by default to the same providers and over time allowing cost
savings to erode.

Contracting out has the most potential in services where one contractor can easily be replaced
by another if service quality flags or costs rise. Defining and enforcing the service levels and
termination criteria laid out in the contract are important ways of making sure that each side
lives up to its end of the bargain. And governments ought not to hand over the keys to the
city to any one private contractor, any more than they should to any one union. Replacing a
public monopoly with a private monopoly would do little good.

The market for garbage collection is potentially competitive, and cartels would probably be
non-existent if contracts are structured properly. Last month, for example, Peel Region (a
suburban area outside Toronto) put out a contract for garbage services. Fully 27 firms
expressed an interest in the project and nine companies put in bids. The more companies that
bid, the better the terms and the lower the costs are likely to be.

At the other end of the spectrum, as in Calgary, are governments that set the private sector
up to fail. Successful contracts need regular bidding that is fair and transparent. Contracts that
result in expensive monitoring and supervision of contractors make contracting no cheaper
than public operation – or preclude it altogether.

And what happens to public employees when there is competition for garbage collection? The
job losses from competitive tendering are usually very small, about 5 per cent, based on the
experience in the United States. To put that into context, total employment at the City of
Toronto grew by 5.4 per cent from 2003 to 2007. Most employees affected by privatization are
hired by the contractor; the rest are generally transferred to other parts of the government.

Public employee unions win 70 to 90 per cent of the work that is put out to an open tender.
Public employees are usually the best option; they just need to prove they are.

REVERSIBLE

Much of the rhetoric and ideology behind contracting of government services makes a false
distinction between public and private. Ending government monopolies does not mean wild-
eyed privateers taking over city councils across the country.

The key to better service is not necessarily private ownership, but an environment that
encourages municipal service providers to innovate: to improve quality and reduce cost. This
means that governments need to have the option of seeking a private contractor if the public
option does not work well for the city.

Retaining the ability to reverse a privatization can be important. The City of Port Moody, a
suburban community outside Vancouver, did just this a few weeks ago. A city that does not
have the ability to step in when a private contractor fails to deliver leaves itself potentially
hostage. For example, the City of Ottawa has achieved significant cost reductions through
competition, but still operates a portion of the garbage service itself to keep the market
competitive. In fact, during the last decade American cities have been contracting work back
in at a faster rate than they have contracted out. This is not a failure of competitive
contracting: the ability to bring work back in-house is crucial to making sure that contractors
know their jobs are always on the line.

Contracting out is often done by carving out segments of a city, with contractors bidding on
different parts. This allows small, locally owned companies to bid for portions of a contract and
does not limit the bidding to giant firms or the city itself. The City of Montreal contracts out
garbage service by its boroughs; about half of the city is served by contractors.
Contracting can also mean allowing neighbouring cities to offer their services. With a
patchwork of small cities in, say, Vancouver or Montreal, the city with the most efficient
garbage system can be paid by its neighbours to take on their service, too.

Canadian cities should be instituting clear contracts for garbage service that do not impose
tightly binding rules on how a service should be provided, but instead set out what service the
city wants and let workers and their managers (either public or private) figure out the best
way to do a job.

Otherwise, Canadian cities will fall into the trap that leads to higher costs and more and longer
strikes. The path to garbage strikes in Toronto and Vancouver started with government
monopolies – the road that Calgary is now on. Unquestioned government monopolies of
garbage service would leave our big cities knee-deep in garbage as their neighbours and
international competitors keep their streets clean and cities competitive