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May 1, 1994

10 Min Read
Partnership Profiles: Public And Private Unite

Susan DeGrane

A private firm designed, built and now manages a waste-to-energy (WTE) facility in Hillsborough County, Fla. A private contractor also operates the county's landfill.

Maintaining control over these operations is no problem, according to Thomas Smith, manager of the Management and Environmental Services Department of Solid Waste for Hillsborough County.

Since Hillsborough County owns the waste-to-energy facility, it has leverage in determining rates, said Smith. The county also staffs the scale house where tipping fees are collected.

Responding to increased government regulations and fear of greater risks, several communities and community agencies have opted for privatization.

The level of sophistication required by federal regulations for waste handling requires expertise that is not always found in community government. Federal regulations also have prompted the closing of many local landfills, causing local government agencies to contract for disposal at remote sites.

Private companies, which often have carried out similar projects successfully in the past, can more easily assume risk. Because insurance companies are aware of that fact, they often give better deals to communities who privatize, thus eliminating many of the risks they once assumed.

Regardless of what seems to be a wave of privatization, the transition has had some rough spots. "Some communities have gotten into trouble with some bad deals," said Paul Stoller, project manager for Camp Dresser and McKee Inc., consulting engineers in the solid waste management field. "Also, in certain areas, the selection process has become less than competitive."

"It is a concern when you end up with three or four companies nationwide that provide the services you need," said Phil Williams, executive director, city of Spokane, Wash. "The trend is to deal with bigger and bigger companies."

Establishing waste handling operations such as WTE facilities, transfer stations and landfills is extremely capital intensive, which explains why few companies can afford to be in the industry.

Yet privatization can have definite advantages, and without it many communities say that they could not have achieved recycling goals, converted waste into energy and collected trash more efficiently. As a rule, however, these communities and community agencies have found ways to maintain control over the services provided to their residents.

The following profiles explore privatization in Hillsborough County, Fla., Union County, N.J., Spokane, Wash., and Bristol County, Conn.

Hillsborough County, Fla. Hillsborough County, Fla., includes Tampa, Temple Terrace, Plant City and some unincorporated areas, but Tampa has its own 1,000-ton-per-day WTE facility. For the other two communities and unincorporated areas, a 1,200-ton-per-day WTE was built in the mid-1980s.

Today, disposal fees are listed as an $84 line item on household tax bills. All residents pay this fee, then pay an additional $6.84 to a private hauler for collection twice weekly.

"The county is weighing the wastes in and being paid," said Smith. "That gives us comfort, a sense of security. The county can say, 'We took in this number of tons as of such-and-such date.' It's more of a verification process for us. We provide the private contractor with copies of all the receipts and we pay them."

The WTE facility has produced about $7 million a year in electricity sales for the last seven years. From Hillsborough County's perspective, the funds help to offset its $16 million-per-year debt for the facility, keeping the rates it charges to county residents for trash collection low.

Hillsborough County takes 90 percent of the electricity revenues from the WTE. "Ogden Martin gets 10 percent, and that's an incentive for them to make sure it works as efficiently as possible," Smith says.

Union County, N.J. The Union County Utilities Authority (UCUA), Union County, N.J., decided to privatize its recycling operations in 1992. Today the authority recycles waste from 19 of Union County's 21 communities.

Automated Recycling Technology Systems (ARTS) of Linden, N.J., designed, built and now owns and operates the resource recovery facility. Union County's goal for recovering recyclables is 60 percent, said Jeffrey Callahan, executive director of the UCUA.

"We're at 50 percent now. To get to the higher recycling levels, we had to include materials not normally collected at curbside, such as construction waste, concrete, tree trunks and stumps. Now the generators of these wastes look to our agency to collect them," he said.

UCUA negotiated a contract with a community within the county whose landfill was about to close. The outcome was that the landfill was to remain open for another six years, and that bulky waste could be deposited there and reused in some instances.

J&J Recycling of Elizabeth, N.J., operates the bulky waste facility. For both the resource recovery center and the bulky waste facility, UCUA handles the paperwork and manages the scales.

ARTS won the contract for recycling because they would be able to keep costs down to $24.23 per household per year. "This was when we decided to add additional materials, like mixed paper, household corrugated cardboard, plastic and tin," Callahan said. "We had planned to raise the fee $3 per household. It was during that time that we decided to privatize."

Though privatization has been lauded as more efficient than public ownership and operation, it still causes many political problems, particularly when community workers are replaced by those employed by private companies.

UCUA managed to overcome this stumbling block by facilitating the transfer of its own employees who were used for recycling collection over to ARTS. "As part of our agreement, they had to hire our 35 employees and they bought our trucks," said Callahan.

Several factors influenced UCUA's decision to privatize its recycling operations. First, it set a high quota for itself in order to keep costs down to the households it would be serving. But secondly, Callahan said, being released from the risk and responsibilities of carrying out such operations freed up the authority to concentrate more on decisions that would benefit the residents.

"We no longer have to worry about traffic accidents or scheduling problems," Callahan said. "A collection operation does add stress to the system.

"Today, if a private party cannot collect due to the weather or a mechanical breakdown, we simply inform other parties that the collection will not be made. Prior to that, we were agonizing over whether or not to collect. Privatization reduces a lot of the distractions," he said.

It can also reduce insurance liability. "We were attempting to join an insurance pool with other authorities in New Jersey," Callahan said. "We were only able to join at the time because of privatization. Prior to that they had reservations about our operation."

Realizing private industry's ability to aggressively develop efficient operations can work to an agency's advantage, according to Callahan.

"I'm not sure this would hold true in every instance, but when a public agency turned recycling over to private industry, it created competition among companies that has driven the cost of recycling down as low as $22 per household. That competition has saved us at least $100,000 a year."

Spokane, Wash. The city of Spokane, Wash., accounts for half the population of Spokane County. The city and county have signed on with 11 other local communities to pledge their solid waste to one common waste management system. In several facets of the system, including waste-to-energy, composting, recycling and household hazardous waste, private enterprise is involved.

O.M. Scott & Sons operates Spokane's composting facility, which was built with public dollars. "We qualified for grant funding of 60 percent of the investment," said Phil Williams, executive director of the city of Spokane. "If we had just contracted for the service, they would not have qualified for the funding, which would have boosted rates for the rate payers."

Spokane contracted with Wheel-abrator Technologies and Wheel-abrator Environmental Systems for the design, construction and operation of its waste-to-energy facility. The operation contract is for 20 years and can be extended for five.

"The vast majority of operational risks falls to them. As a company, they've operated several facilities, so they have experience. But three of Wheelabrator's trash plants are publicly owned," said Williams.

Spokane shares electrical revenues with Wheelabrator and requires that the company provide certain assurances such as supplying alternate disposal in case of malfunction and compensation for lost electrical revenues.

Spokane also has contracted with a regional landfill to dispose incinerator ash. The ash moves by rail, which offered Spokane the best price for transportation and disposal. But the city had to consider the deal in terms of meeting stringent government requirements and not incurring liabilities through handling. They closely scrutinized the landfill operators and their method of transportation to the facility. As Williams said, they still came out ahead.

Spokane collects trash and recyclables using its own employees, but in the communities outside the city and in unincorporated areas, private contractors have been hired.

Many communities have suggestions for maintaining control over the services they provide; but, said Williams emphatically, "Things are no longer just going out for bid. Requests for proposals are a little different." For example, Spokane wanted to find the lowest possible cost but also insisted that the vendor had operated another facility in the United States.

Bristol, Conn. In 1984, 11 Connecticut communities banded together to establish a waste-to-energy facility that would be designed, built, owned and operated by a private firm. The facility was financed with tax-exempt revenue bonds.

The communities agreed to provide minimum tonnages to the facility and formed the Bristol Resource Recovery Operating Committee to oversee its operations.

"In some areas we see that we have control where we need it; in other areas, we see that we need to have more control," said Jonathan Bilmes, executive director of the committee. "Contract development assures a community's control."

Overall, the project has been a success. It was recently profiled as one of the Environmental Protection Agency's (EPA) Public-Private Partnership Case Studies. Three additional communities have joined the operating committee and have been working together to establish recycling operations that would also handle many household hazardous wastes in addition to other recyclables.

The municipalities are still responsible for providing waste collection, through their own personnel and equipment or private contractors. But all have derived the benefits of these other operations. Electricity sold to the local utility company from the WTE facility has cut tipping fees.

Bristol, which is the host community for the waste-to-energy facility, receives tax revenues that pale in comparison to what Bilmes points out as the real advantage. "I don't think that private sector ownership is necessarily an issue. The best real advantage is having them design, build and operate it."

Bristol town manager John Weichsel disagrees, however, that what has happened in Bristol can be called privatization. "It's not privatization. The town's merely contracting with a private company to build, own and operate this facility with the promise that the company meet all government regulations. And we've agreed to bring that facility a quota of waste."

Bristol and the other communities have signed 25-year contracts with the private owner. They've also worked hard to hammer out a suitable rate structure - a formula that Weichsel describes as "fair." There have been three amendments to the contract since 1988, he said, but the fact that more towns have joined the operating committee attests to its success.

"This works the way the telephone company once did," Weichsel said. "It used to be monopolistic, but there was control on both sides. It's very efficient. I just wish everything in my life worked as well as that garbage plant."

To maintain control in public-private partnership situations, some communities assign a great deal of importance to the contract negotiations. Some seem to be on red alert in the project procurement stages and have been intent on weeding out inexperienced contractors. Some community agencies like the one in Hillsborough even staff employees at landfill scales and actually collect tipping fees for the private contractor.

Communities that have successfully embraced privatization in many instances also have discovered that a great deal of strength can be found in numbers. Coop arrangements form and grow, and later more communities reap the benefits of public-private agreements.

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