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Low-balling garbage costs

| Sunday, July 20, 2008

The City of Pittsburgh is providing garbage pickup for Wilkinsburg through 2010. The city claims it will save the borough about a half-million dollars a year over what Wilkinsburg would have been paying its former private collector.

Now Pittsburgh wants to interest other municipalities in such potential savings. But something doesn't quite jibe.

The annual per household cost of garbage pickup to Wilkinsburg is $120. Indeed, this is lower than the amount the private collector had planned to charge after implementing a rate increase. But it's lower than what Pittsburgh spends to pick up garbage for its own residents -- more than $200 annually.

This raises doubts about the claims of efficiency from Pittsburgh officials and city refuse workers and how much savings the city could deliver on trash and other services it is ambitious to expand.

Finding out how much it costs to pick up trash in Pittsburgh was complicated; neither city nor borough were forthcoming in releasing accounting information. So we had to estimate the cost using a variety of sources, including the Intergovernmental Cooperation Agreement from the borough and Pittsburgh's 2004 Mayoral Financial Forecast.

We were able to estimate that Pittsburgh's annual per household garbage pickup cost is $202, about 68 percent higher than the amount Wilkinsburg is being billed.

What are the implications of Pittsburgh making a below-cost foray into garbage collection beyond its municipal borders?

First, city residents are subsidizing the venture. In Wilkinsburg's case, it's about $480,000 per year. The subsidy cost to Pittsburgh taxpayers will become even larger if the city expands service at the low rate to other municipalities.

Second, the city loses its claims of being more efficient than the private sector.

Third, it raises the issue of the city doing what it has always accused the private sector of doing -- undercutting the competition with a low-ball bid.

Pittsburgh officials remain bullish on the potential opportunities the Wilkinsburg agreement presents and that is the line they are selling. Not only do they want to expand garbage collection, they want to offer up animal control, building inspection and other services to willing municipal buyers.

"You all know, as I do, that the cost of delivering government continues to rise," reminds Mayor Luke Ravenstahl. Ironically, many of Pittsburgh's services are among the highest cost and least efficient in Allegheny County.

That's why it is so surprising that of all the functions the city performs it would lead with refuse collection as the "foot in the door" of contracted services.

Studies going back to the 1996 Competitive Pittsburgh report, through the Act 47 Quarterly Report of 2007, have found that garbage collection is an area ripe for reform. At various points these reports documented collection costs out of line with the private sector, high workers' compensation expenditures, low output compared with other cities and so on.

Now the operation is deemed efficient by virtue of its purportedly successful contract to provide service outside its borders and this is supposedly the springboard for moving into other areas.

An accurate and complete accounting of the true cost of Pittsburgh-produced services should prompt Pittsburgh City Council to take a second look.

Eric Montarti is a policy analyst at the Allegheny Institute for Public Policy. Jake Haulk is the institute's president.

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