A NEW PRICING SYSTEM should bring competition to New York City's commercial waste market by mid-summer. The plan amends the method waste haulers (carters) currently use to charge their customers.
Since 1996, carters have worked under a $12.20 per cubic yard rate cap. This volume-based rate cap has been a source of struggle among some carters who say that if they follow current city regulations, they are unable to make enough money to cover tipping and transfer station fees for customers generating heavy waste.
As a result, carters have avoided picking up heavy waste accounts. The haulers say that customers, therefore, have been driven to strike up illegal, off-the-record deals to ensure their waste is picked up regularly. Deviant haulers have been making a profit by charging more than the rate cap allows.
“With a volume-based rate cap, you prevent me and other honest haulers from bidding on heavier weighted accounts,” says Mickey Flood, CEO of Haltom City, Texas-based IESI Corp, which has collection operations in New York. “If you're paying attention to the regulations, you can't negotiate. You have to drop customers.”
The new system, introduced by the New York City Business Integrity Commission, will keep the same $12.20 per cubic yard rate cap, but it will allow haulers the option of also charging customers by weight. The new weight cap is $160 per ton.
According to Business Integrity Commission Chief of Staff Robert Schulmann, haulers are enthused about the new pricing options. “We're trying to rationalize the system,” he says. “The problem with a cubic yard is nobody knows what a cubic yard is. Even an experienced carter can't measure a cubic yard because in the real world, there's no science for it. Weight is consistent with what goes on at transfer stations. There was a lot of confusion with charging a customer by volume then turning around and paying based on weight.”
Schulmann adds that volume-based pricing makes sense with customers producing voluminous waste, such as garment manufacturers. But weight-based fees will be more appropriate for heavy generators such as restaurants.
Although the rate cap of $12.20 per cubic yard dates back to 1996, the story began in 1956 when the New York Department of Sanitation (NYDS) stopped picking up commercial waste. At that time, a rate cap was introduced with the purpose of protecting customers while allowing carters to turn a profit.
Industry insiders say bureaucratic fluctuations and government complacency landed commercial waste largely in the hands of organized crime. Initially, commercial waste was overseen by the now-defunct Department of Licenses, which eventually folded into the city's Consumer Affairs Department. The Trade Waste Commission became a permanent city agency in November 2001 and changed its name to the Organized Crime Control Commission. In July 2002, the group became the Business Integrity Commission.
After Consumer Affairs was handed authority over commercial waste, it periodically raised the rates until the cap reached $14.80. In 1996, the commission studied the rate and concluded it was too high. “So the rate cap idea is not from the '90s, it's from the '50s. It's almost a half a century old,” Schulmann says.
The current rate cap has been met with resistance from carters, too. “My opinion is New York City shouldn't have a rate cap,” Flood says. “Philadelphia, Chicago and Boston, to name a few, have no rate caps. New York put the rate cap in because the cartel was there, controlling the systems. They're gone now. Now we have free enterprise. But the cap prevents competition.”
NEW YORK CITY COMMERCIAL WASTE RATE CAPS
$12.20 per cubic yard
Cubic yards, the only way to charge for commercial waste, can be difficult to measure and inconsistent with tipping fees, which are typically based on weight rather than volume.
$12.20 per cubic yard or $160 per ton
Customers may see initial increase in fees, but competition among haulers is expected to help keep costs down for waste generators.