Hey, its Philipp again, with the next installment of Talkin’ Trash. In the last episode, we saw that the landfill industry is becoming more privatized, and more consolidated. Today we’re going to look at why that’s happening, and what it means for you.
As to why it’s happening, there are several reasons. Local government officials are on relatively short election cycles, and politicians don’t like to be seen as spending money, particularly on something as mundane as solid waste management. Conversely, selling off a landfill brings a one-time windfall to the public coffers, which officials can claim as a win. Private companies have access to capital via debt and equity markets and can operate on much longer timelines. Finally, there are economies of scale involved. A municipality can own one landfill, or perhaps two or three small ones. A private company has no limit, and can easily negotiate with many jurisdictions, sometimes even in several states.
But these factors presume that there’s a profit to be made by running a landfill, and as we saw in the previous episode, revenues are way up. So what does that mean for you? Well, the increase in revenues is coming from you, the consumer. In addition, because the drive for profits affects landfill operations, you pay in other ways. Collection procedures such as consolidating all recyclable materials in one bin to reduce labor costs means that much of that material is unfit for recycling by the time it gets to the sorting facility, and it, too, ends up in the landfill, a huge “opportunity cost.” Privatization also means that regulatory oversight is moved at least one step away, and companies find it is often cheaper to pay a fine than to fix a problem before the regulators find it. Landfills pollute air, water, and soil, spread disease, harbor vermin, and cause other problems, all of which the consumer ultimately pays to fix, through property taxes. And privatization takes away a level of control.
It’s becoming apparent that trash collection is a lot more complicated financially that it might seem. For now, here’s what to remember:
- Several factors make it easy for private companies to acquire landfills, and the promise of profits drives them to do so.
- As a result, the consumer pays more in direct costs, as well as bearing the burden of externalities such as lost recycling, pollution, and disease.
- Privatization creates a lack of control, making it harder to enforce regulations and to have a say in landfill operations.