Show Me The Money

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One of six private haulers trying to win the contract to pick up our trash promised savings of $17 million over the life of the contract. If you read City Manager Dave Kiff’s report, Residential Solid Waste Service Proposals (9/10/13), you’ll find this is a mix of annual operating savings and one-time capital savings.

The one-time savings are for recovering $4.3 million set aside for capital spending and $1.5 million for selling the existing fleet of old garbage trucks. There’s also $3.2 million in revenue for leasing the City’s transfer facility. None of these credits are included in the business as usual estimate for the current system. If you back these capital items out, apples-to-apples, the best private bid is $8 million better or about $1.1 million per year.

Kiff refers to this as “core services only.” Three private bidders were unable to beat the City on these core services and were eliminated on Sept. 10. The three still in the running beat the City on core services by $191,000-1,065,000 per year. Thereafter, it’s a question of how good the numbers are and will the service really be just as good.

Most people who propose privatizing believe in competition and free markets, but public utilities such as the water company, the electric company, or the trash hauler are what economists call “natural monopolies.” If we let water companies actually compete, we’d have half a dozen water pipes running down every street so you could pick your own supplier. Building all those private water pipes would be very expensive. So when you have natural monopolies, either the government ends up providing the service or they select a private company and grant them a monopoly to provide the service. If you turn things over to a monopolist, you must regulate it or it’ll get out of control.

That’s what’s happened with the monopolies they handed out for cable TV. If you’re a Time/Warner subscriber, you know what I’m talking about. In this case, the City thinks it can keep control by limiting the term of the contract and having the City handle the paper work at the Taj Mahal. Some of the neighbors correctly pointed out at the City Council meeting Sept. 10 that the City will lose a lot of leverage once it shuts down the publicly owned alternative. Another UFO here is how much the Council’s decision is being influenced by their desire to get their hands on that $5.8 million in capital and what they’d spend it on.

You’ll have to decide for yourselves whether you can pay workers 20 percent less and get the same quality of service, but then there are folks out there who still believe in the free lunch.

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