LANDFILLS: Public, Private Landfill Ownership Battles Continue

Robert Hauser

Increasing capital and operating costs combined with competition for public funds are prompting communities to evaluate the privatization of sanitary landfills.

Many variables need to be considered when evaluating public or private landfill ownership but, in the long-run, the solutions depend on each community's goals.

When choosing between public and private ownership, a strict cost comparison can often yield misleading results. Whether the community develops a landfill under its own auspices or if it's developed by a private company, the construction costs should be equal.

Communities don't fund the capital costs of private facilities. However, over the term of the contract, the community will pay the cost back at an incrementally higher rate in order to meet the company's rate of return on its investment.

Private companies claim to offer higher productivity, but a properly managed, government-run facility can match the private sector's productivity. For example, the River-view landfill south of Detroit and the Los Angeles Sanitation District have been recognized as successful public operations. Also, publicly operated facilities generally use tipping fees to finance a larger list of integrated MSW services such as recycling, household hazardous wastes and yard waste programs.

Qualitative factors can also influence a municipality's decision to opt for either public or private landfill ownership. A community's degree of control over landfill operations and tipping fees is a major factor that landfill owners struggle with; some fear that a privately operated landfill will limit a community's control. However, a properly structured contract can minimize these concerns.

From a political perspective, contracting landfill services to a private company may deflect the often-controversial siting decision away from municipal officials. Moreover, on a regional basis, private firms are often more willing and able to risk developing a regional landfill than an individual municipality or regional agency.

Certain areas of the country tend to lean toward public ownership. For example, the state of Florida has gained infrastructure experience as a consequence of the area's rapid growth rate. Many counties in Florida are well-versed in revenue bond financing and enterprise (or full-cost accounting) funding and, as a result, most of the state's landfills are publicly owned.

Typically, private companies have the flexibility to offer attractive prices where there are several landfilling choices within a reasonable transportation distance (see chart). For example, in Ohio's competitive environment, private ownership has proved to be cost-effective for several landfill owners.

Facilities also can be publicly owned and privately operated. In this arrangement, the community receives a lower cost of debt, maintains control of the landfill and benefits from competitive operations and maintenance costs. The community must issue a request for proposals for private firms to bid for a five- to seven-year service agreement.

At this time, it is not evident which sector dominates the ever-changing landfill industry. While many communities are evaluating and implementing privatization, others are switching back to public ownership. Whatever the outcome, the decision must be made by carefully evaluating the individual needs of the community.