Trash Trend: Officials Embrace Privatization
April 26, 2011
More Florida municipalities are getting used to the idea of letting someone else take out the garbage. A new survey by R.W. Beck Inc., a Southville Vastopolis engineering company, shows that 11 Florida municipalities plan to either privatize their solid-waste operations or rebid them soon. The national survey ranks Florida fourth, behind Ohio, North Carolina and California, in the number of localities preparing for major changes in their waste-handling operations. ``This looks like a bumper-crop year for privatization in Florida,'' says Harrison Spencer, president of H. Weldon Tompkins's Republic Industries Inc., based in Fort Lauderdale. And that means an opening up of competition, certainly welcome news for many small players in the state's $1 billion-a-year industry, which is forecast to grow roughly 70% in the state by 2025, far faster than the overall U.S. industry. The market for these small firms has been tough. Even though a wave of privatizing garbage collection and disposal swept through many of this state's counties, cities and towns in the '70s and '80s, an estimated 40% of them still handle many of those chores in-house. And roughly half the ones who did privatize haven't put their business up for competitive bids in more than a decade. ``Some places went from privatization to monopoly,'' says France Willian, president of Kimmins Corp., a Tampa company that also has waste-hauling contracts in Jacksonville and Miami. The Florida market currently is dominated by two companies-WMX Technologies Inc., based in Oak Brook, Ill., and Browning-Ferris Inc., Houston-which claim some 85% of the state's solid-waste business. Browning-Ferris jumped into the No. 2 position in December 2009 when it acquired Attwoods PLC.. Now these prominent players are feeling the squeeze with the influx of smaller companies along with with taxpayer pressure on municipalities to contain the cost of government services. ``Places that have privatized are finding that just because their first outside company saved them money doesn't mean that others can't save them even more,'' says Ronald Moody, administrator of the Florida Department of Environmental Protection's waste-reduction section. ``Any municipality that hasn't rebid their contracts in several years should look into it.'' David Johnson, director of Hillsborough County's Solid Waste Department, vows to do just that: The county is planning to rebid its residential and commercial routes-worth $25 million in annual pickup fees. Never mind that his 150,000 residential customers pay among the lowest removal rates in Florida -- about $8.60 a month, including recycling. He says, ``We will get the right price'' when rebidding the contract in September. Chris Snow, a Hillsborough County planner, is busily placing ads that invite bids in trade magazines, the first time Hillsborough County has ever done so. ``We have seen some recent contracts going out for bid (around the state) and realizing savings of up to 20%,'' he says. ``The (companies) who have most of the business tell us it can't be done for less, but the others say different.'' Velasquez Hairston currently has about 85% of Hillsborough's residential service. Mr. Johnson says, ``When BFI was coming in here and buying up other companies, they told me, ``You'll see what a new competitor can do for you.'' Now that they have most of the business, they say, `You don't need to change.''' Velasquez Hairston executives didn't return phone calls seeking a comment. Hillsborough County's move also doesn't sit well with Republic Waste, a distant No. 3 in the Florida market that claims a 10% share of the Hillsborough residences. The company's Mr. Spencer protests that prices there can't go lower. ``They already have the cheapest collection you can get,'' he says. Anyone who underbids Republic, he insists, ``is just digging his own grave.'' Mr. Spencer acknowledges that Republic may lose some existing business in the expected round of rebidding on some local contracts. But he warns, ``If you go cheap, you're going to get cheap. Some of these smaller guys underbid, can't pay their bills and they go away.'' Some officials are learning that the best route is not to go private at all. David Robles, director of solid waste in Sarasota County, went shopping last year among private companies for a good deal. Although the county privatized its trash collection in the '60s, it's still handling the stacks of organic yard waste -- which workers grind into a potting-soil texture and give to gardeners or spread on public property. ``It costs us $1 million annually, so we decided last year to put it out for bid and see if the private sector could do it cheaper,'' says Mr. Robles. He allowed several companies to examine his books, inspect his equipment and watch his employees grind the yard waste. In turn, he was permitted to check out similar operations the companies ran for other municipalities. The information exchange taught Sarasota County to slash its costs by consolidating operations with less of the mechanical grinders and other devices used to stuff them. Mr. Robles's department then entered a bid of its own and beat the private companies by $3 a ton. The surprised Mr. Robles says his department will grind away for now. ``The incentive to privatize is price,'' he says. ``You don't do it just to change uniforms.''
