Privatization of municipal sanitation systems [Dec. 1987]

PRIVATIZATION
OF
MUNICIPAL SANITATION SYSTEMS
GEORGIA DEPARTMENT OF
COMMUNITY AFFAIRS
,I

PRIVATIZATION
OF
MUNICIPAL SANITATION SYSTEMS
prepared by
I GEORGIA DEPARTMENT OF CO:MMUNITY AFFAIRS
Jim mgdon, Commissioner
Government Information Division 1200 Equitable Building 100 Peachtree Street Atlanta, Georgia 30303
(404) 656-5526
DECEMBER 1987
An Equal Opportunity Employer

INTRODUCTION
Privatization is a term applied to an action taken by a local government to engage a private contractor to perform a public service formerly provided by a city or county. In the process of privatizing a government service, the local government stipulates the characteristics and levels of service to be performed by the contractor along with the amount of remuneration paid for providing the service.
Smaller communities in Georgia elect to privatize their solid waste management operations for reasons of pOlitical expediency. This is supported by research indicating that meaningful cost savings cannot be obtained by privatizing the sanitation function until the population to be served reaches the 50,000 level. However, if a community has chronic problems with maintaining a less than effective service level, improving levels of service for the same annual cost may be achieved through privatization. Conversely, if a private contractor is unable to reduce problems and complaints, then the potential for reducing the annual cost of providing the service may be nullified.
This publication contains a checklist providing a step by step procedure for a particular community considering the privatization of its trash collection and disposal operations. It may not necessary reflect your communities needs or uses. The purpose of the checklist is twofold:
1. To provide an inventory of solid waste management operations, facilities, and finances which will serve as a factual basis for making a decision to privatize.
2. To help a community weigh the political pro's and con's of privatization.
This checklist will not necessarily simplify a decision to privatize. On the contrary, a quick glance through the checklist will reveal that this can be a complex matter. Therefore, the Georgia Department of Community Affairs urges each and every community which uses the checklist to contact the Department for guidance. The Government "Information Division will be able to provide data gathering and analysis services which are an integral part of the checklist. In addition, application of other steps in the checklist will in all likelihood require information or assistance from other sources such as the Georgia Municipal Association and the Georgia Department of Natural Resources, Environmental Protection Division.
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This publication was based on a study performed for the City of Athens. The study was provided to us by Mr. Enace, in hopes it may possibly assist other communities in determining privatization.
If you have questions or need assistance in the application of the checklist, please contact Ms. Lynn Thornton, Assistant Commissioner, Government Information Division, Georgia Department of Community Affairs, at (404) 656-5526.
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Privatization of a Municipal Solid Waste Handling System
A community considering the contracting out of its trash collection and disposal system to a private firm will do so for one of two reasons:
1. The cost of operating the system can be reduced, while maintaining a desired level of service.
2. Elected officials no longer want to bear the burden of complaints and problems arising from the solid waste handling responsibility.
The decision to privatize this service is not always made on the basis of anticipated cost savings. However, a community must have accurate cost data available to serve as the basis for making a decision to privatize any municipal operation.
The following checklist provides a step by step procedure for use by a community considering the privatization of its sanitation department. Application of the checklist will not provide a standard formula for making this decision. However, it is useful as an information gathering and analysis tool.
Step One: Inventory all elements of the existing municipal sanitation department.
Staffing: positions, salaries and benefits, personnel regulations, insurance and bonding.
Facilities: offices, maintenance shop, transfer stations, landfill.
Equipment: Age and condition of trucks, leaf and limb mulchers, street cleaners.
Legal: sanitation code, Federal and State laws, bidding requirements, landfill permit regulations.
Administration: billing system; customer complaint handling procedure; work order forms; customer notification system; data collection methods.
Special services: Leaf and limb collection; recycling; large or bulky item pickup; hazardous waste.
Collection and disposal system: routes, number and location of pickups, container type and location requirements, miles travelled, holiday pickups.
After examining your existing sanitation system, make a decision about improvements which need to be made and the level of service desired. Inadequacies in the current level of service must be identified in order to determine the accurate, full cost of operating an effective service.

Step Two: Obtain information and guidance from other similar communities which have privatized their sanitation departments.
Contact the Georgia Department of Community Affairs, Georgia Municipal Association, or Area Planning Commission for assistance with this step.
Ask other communities if they used cost comparisons as the basis for privatizing their operations.
Ask other communities which have privatized if the contractors have maintained desired service levels while reducing complaints.
Ask the communities if they have experienced political problems as a result of their decision to privatize.
Obtain, if possible, the average annual cost of operating a sanitation department for several communities in your population group.
Step Three: Determine the average annual cost of staffing and operating your muni~ipal sanitation department. Inventory the following:
Salaries and fringe benefits.
Equipment costs: vehicles, fuel, maintenance, tool purchases, transfer stations, weigh scales, etc.
Facility costs: rentals, utilities, maintenance.
Landfill fees.
Services for which fees are not charged (commercial pickups, bulky item pickups, etc.).
Total all annual costs; then subtract this figure from annual fees or expenditures (from the general fund) required to support the system.
Compare the average annual costs (for a period of two or more years) of operating your sanitation department to cost figures for other municipal sanitation departments obtained in Step Two. Based on this comparison of costs, service level desired, and political pros and cons, make a decision to contract out your solid waste handling system.
Step Four: Establish a procedure by ordinance for soliciting bids from private contractors for trash collection and disposal service.
Determine the characteristics and service requirements of the system for which the successful bidder will be responsible.

Select the time period for which the service contract will be in effect: establish contract renewal guidelines; determine employee insurance and bonding requirements.
Contact the Georgia Department of Community Affairs, Georgia Municipal Association, or consulting engineer for the purpose of working out the details of the bidding process: obtain advice from the city attorney.
Once bids are received, examine each proposal to determine if the qualifications of bidders and the level of service to be provided are sufficient to warrant a decision to privatize.

DCA
GEORGIA DEPARrMENT OF COMMUNIlY AFFAIRS 1200 Equitable Building 100 Peachtree Street Atlanta. Georgia 30303