Privatization Case Study
Privatization of the City of Hollywood, FL’s Solid Waste Services
Privatization of solid waste and recycling services is making a strong resurgence. Although it is a very difficult decision for an elected official to make, if the changeover is done properly it is a win-win decision for all involved.
Robert J. Hyres
The concept of privatization of solid waste collection services is nothing new. This change from using government employees to contracting with a private company for solid waste collection services has been a continuing trend for the past 50 years. The move to privatization is usually driven by the desire for cost savings.
The past couple of years have seen a dramatic change in the finances available to government to provide for needed services. The 2010 State of America’s Cities survey of local elected officials’ finds:
75 percent of city officials report that overall economic and fiscal conditions have worsened over the past year.
Eighty-four percent of city officials report that unemployment has worsened over the past year and nearly nine in 10 say it is either a major (41 percent) or moderate (47 percent) problem for their community.
More than six in 10 (63 percent) of city officials report that poverty has worsened over the past year; representing the largest percentage of city officials reporting worsened poverty conditions since the question was first asked in National League of Cities 1992 survey.
To deal with the fiscal implications of these and other economic conditions, seven in 10 city officials report making cuts to personnel (71 percent) and delaying or cancelling capital projects.
One in two (52 percent) city officials report that service levels will continue to decrease next year if city tax rates and fees are not increased.
When asked how overall economic and fiscal conditions have changed in their community over the past year, three in four city officials (75 percent) report that they have worsened (see Figure 1). From employment to the stability of the housing market, signs of growth that may be making their way into the national picture are not yet evident in many local economies across the country. City and County elected officials are faced with shortfalls in tax revenues and are searching for ways to save money without reducing service availability and quality.
Hollywood, FL Looks for Savings
Waste Pro USA (Longwood, FL) has recently responded to seven privatization Request for Proposals, those being the cities of Beaufort, SC, Charlotte, NC, Macon, GA, Gainesville, GA, Hollywood FL, Port Royal, SC and Williston, FL. Macon and Charlotte opted to stay with city staff-provided services but Charlotte is now moved to privatize all of its curbside recycling switching to a 64-gallon single stream program, while the City of Williston privatized with another waste collection company.
In June of 2009 the City of Hollywood, FL put out a Request for Proposals to privatize the city’s solid waste collection services. During the City’s budgeting process for FY 2009/2010 the City staff was looking for ways to save money and keep taxes in line, taking into consideration the economy and expected revenue shortfalls. Waste collection and recycling was one of the largest segments of their budgeted expenditures and they decided to take proposals from the private sector to see how it compared to their current in-house costs. In making this decision they considered:
Will privatization prove to be more efficient?
Should we privatize all or just part of our solid waste and recycling collection services?
Can a private contractor be held accountable?
How long should the contract term be?
Are there reputable experienced contractors available?
Can we eliminate current and future debt?
How will this affect the city’s liability and risk?
What will happen to the city’s employees?
Ethical and legal considerations?
Who will oppose it and how strongly?
What will public opinion be?
There were six proposals submitted. The city workers are unionized and their contract allowed them to make a proposal after seeing the ones submitted by the private companies. This process was drawn out over several months and the proposal that was finally submitted created a price reduction that was still considerably higher than Waste Pro and called for a significant reduction in service level.
Implementation Challenges
There were also a number of implementation challenges. The city council, feeling concern for their city workers initially opted to accept the union proposal, but, due to an outcry of public opinion, their final decision was to contract with Waste Pro because under the union proposal they were going to lose their once a month bulk and green waste collection and still pay much more that they would by privatizing. After the decision was made, there were other complications. Privatization is inherently difficult to put in place because of resistance by city workers, who were unionized in this instance. There was also a natural opposition by the elected officials to take jobs away from long-term city employees. In addition, there was a formal bid protest by one of the other proposers and when that was denied that proposer filed a lawsuit requesting an injunction to halt the bid award and implementation. The request for injunction was denied in a court hearing.
Another challenge was a threatened walkout by the union employees. Overnight Waste Pro arraigned for trucks and workers and by 6:00 am the next morning was on standby at a nearby location to provide emergency services. Once the actual implementation process was started everything went smoothly.
Cost Savings
The cost savings for the City of Hollywood totaled more than $25 million over the 10-year life of the contract. The cost savings were driven by two significant differences. Waste pro is doing the job with 23 workers versus the city using 58 workers. The average city employee had 46 paid days off each year, while Waste pro employees average 23 paid days off yearly.
The service is now being provided with about one half of the previous employees and service levels are as good or better than before and the residents are very satisfied. The City’s workers were all merged into other work areas and jobs within the City. All of the City’s solid waste and recycling services were privatized and since then in conjunction with the City of Hollywood Waste Pro has implemented the first Recycle Bank cart collection program in Broward County.
A Win-Win Decision
Privatization of solid waste and recycling services is making a strong resurgence. It is a very difficult decision for an elected official to make, but today’s economy is giving them the “political cover” to make that choice and if done properly it is a win-win decision for all involved.
Robert J. Hyres is Executive Vice President of Waste Pro USA, Inc. Prior to joining Waste Pro, Robert worked for USA Waste/Waste Management and Western Waste Industries. He graduated from Rollins College with a BS in Business Administration & Economics, and its Crummer Graduate Business School with a Masters of Science in Management degree. He is a member of the NSWMA – Florida, past Chairman and past Vice-Chairman, a member of the National Board of Governors – Florida Representative, a member of the National Government Affairs Committee and a Board of Directors member for SWANA. He is also involved in the Florida Center for Solid and Hazardous Waste Study as a Past Chairman of the Executive Advisory Board and as a current Advisory Board Member. Robert has been an educational presenter at numerous meetings and conferences. He can be reached at (407) 869-8800 or [email protected]
Figure 1
How have overall economic and fiscal conditions changed over the past year?
Figure courtesy of Waste Pro USA.