Time to Pay the Trashman

STRAPPED FOR CASH, some local governments are resorting to hardball tactics to collect unpaid fines and charges, including trash collection fees. For many cities and counties, getting tough with their constituents means turning to private collection agencies.

When a local government sends a free-standing bill for trash service, the opportunity for delinquency soars. Cities and counties often try to minimize the delinquency risk by tacking waste collection charges onto the real estate tax bill. When an owner pays the tax bill, annually or in installments, the collection fees go into the municipal coffers. As a rule, real estate tax bills are paid more reliably than separately billed utility charges. Property owners cannot shrug off delinquent real estate taxes when the consequences are liens and foreclosure proceedings.

Local governments also sometimes bundle trash collection fees with other utility charges in a single bill in an attempt to increase their chances of collecting the money. That way, a resident faced with a cut-off of electricity may feel more pressure to pay his or her solid waste fees than if the charges were billed separately.

Still, delinquencies do occur, and while it may seem petty for a local government to hound a resident for a $35 charge, the return can be significant. The choice becomes doing nothing and collecting nothing versus sharing the revenue with a collection agency that works on a contingency basis: The agency gets paid only if the city or county gets paid.

Private waste firms should keep collection in mind when contracting with a local government. How a local government or waste agency pays a contracted hauler can vary significantly from place to place.

From the private hauler's perspective, any arrangement that calls for unequivocal and regular, predictable payments by the public entity is ideal. If the payment is characterized as a general obligation of the municipality, then the firm has a pipeline to the general treasury.

Local governments and public agencies often are taking a more cautious view toward accounts payable. Prospective service providers, with increasing frequency, are seeing bid documents with narrowly crafted payment terms. For example, a contract may spell out precisely the frequency and amount of the payments to a private hauler, but limit the source of payment to the balance in a designated fund.

Moreover, the contract may stipulate that the payments due under the contract or franchise are not deemed to be a general obligation of the jurisdiction. Thus, if a city or county falters in collecting waste fees and charges, and, as a result, the balance in the designated fund is insufficient to pay the amounts when due in full, the contracted hauler may be obliged to temporarily accept whatever dollars are available.

How can a private hauler offset that disadvantage? One way is to insist on a provision that compels the local government to use every available means to lay its hands on the money, including a private collection agency.
— Barry Shanoff
Legal Editor
Rockville, Md.