Document ZmJKypO2Kjvnevn9JO1MJxGL

c.c : Space Available ~~fo \J -C & oo-J-- 6--P-o .. |^ob wc-H- _rKij evsA'.L* "f^o-- Economics of Trash Shift as Cities Learn Dumps Aren't So Full i- Recycling and Incineration Help Increase Leverage Of Hard-Pressed Towns ^--l. --\ w r---- J" . Court Ruling Adds to the Mix It LS AJTC, By Jeff Bailey SlaJ] Reporter 0/ The Wall Street Journal Like many Americans, Robert Mehe- gan, a Boston public works executive, had -hj/l been hearing about a national garbage crisis for years, with the dwindling availa U.S. Plastics Recycling ,Advanced Last Year bility of landfills inexorably driving the cost of garbage disposal skyward. So he was startled last year when bids for the city's garbage contract actually dropped from S70 to S50 a ton, saving Boston ^dustry Group Says taxpayers $7 million a year. Mr. Mehegan, along with counterparts in Philadelphia and Cleveland, is reaping the benefits of increased competition in the By a Wall Street Journal Sto// Reporter WASHINGTON.- Plastics recycling as i percentage of U.S. plastics production -ose last year, reflecting heightened envi-onmental concerns among consumers and manufacturers, the industry said. . - Plastic soft drink bottles were recycled it a rate of 36% last year, up from 30% in .he previous year, according to the Society }f the Plastics Industry's Partnership for Plastics Progress'. SPI is a trade group. : The group said about 11% of all plastic oottles' and containers, including soft estimated S25 billion-a-year waste indus, try. All three major waste disposal compa, nies showed newfound aggressiveness in bidding for the Boston contract. Contrary to dire predictions, dump capacity is in creasing, fostering lively price competition that could save American cities hundreds of millions of dollars. - Yesterday, the Supreme Court issued a ruling likely to further fuel competition, stating that states can't bar interstate waste shipments. (See story on page A3). That should further embolden cities, which already are taking advantage of the new Irink, milk; detergent, margarine, tubs' environment by demanding deep rate cuts, and yogurt cups; were recycled in 1991; banding together to increase public-sector compared with 7% the previous year, leverage over dump prices, and building ' The industry's goal, set last year, is to recycle 25% of all plastic bottles and con tainers by the end of 1995. "We're almost halfway there," said J. Roger Hirl, presi j new dumps of their own and expanding old ones to bypass more expensive private landfills. High Stakes dent and chief executive officer of Occiden f Philadelphia and Cleveland joined Bos- tal Chemical Corp, in Dallas who Is chair: , ton in recently hammering out long-term man of Partnership for Plastic Progress.' contracts that lowered their disposal costs : He said 4,400_communitiesjaowvleave , by more than 20%. plastic containers and bottles' on th'e curb IV It's true, many dumps have been clos side to.be picked up for recycling or drop' ing, but they've been the tiny ones. The them off' afdesjgnafed' locations.Jle said lost space has been more than offset by a about. 12(c6mpames reclaim, those dis- handfull of huge, new waste sites. At the ^fcwTpjastic. bottle.,' and^containersfei-' same time, increased use of incineration, ^Plor^i^th^mintothe^^eprpducts- reqyding and, more recently, the effects of or to turn them into plastic b'ags'and carpet". 'thVrecession have combined to cut more fiberyamongother ;M}eeplythan anticipated into the nation's (refusethat must go to dumps._ l CTL007507 Tfie sidf.es in me c.sposal price warI fought mostly between big municipalities and a handful of companies led by Waste Management Inc. and Erowning-Ferris In dustries Inc.-are huge. The nation gener ates about 180 million tons of trash a year. Should it cost $10 a ton to dump, as it does in San Jose, Calif., or $131 a ton, the sum Morris County, N.J., pays to have its rub bish trucked to Pennsylvania? ` For most of the last 20 years, the big garbage companies have been gaining the upper hand, grabbing more than half the market. The lowly dump, with its operat ing profit margins (before taxes and corpo rate overhead) of 50%, turned garbage companies into glamour stocks. Lofty stock prices financed acquisitions, which brought growth that sent the stocks still higher. That rise was fueled, in part, by the widespread perception that dump capacity was shrinking. In fact, most dumps that closed were tiny, more than offset by a handful of huge new waste sites. At the same time, increased use of incineration, recycling and, more recently, the effects of the recession have combined to cut more deeply than anticipated into the nation's refuse that must go to dumps. Local Business AH the while, many municipal officials remained ignorant about the economics of trash. "It was easy in the 1970s not to deal with the issue because the average [monthly) household bill was S5," says Gary Brayton, a garbage consultant at Deloitte & Touche. "Now it's S30 to $40 in some areas. It's a significant cost to citi zens." Just about the time those prices were janring many municipalities toward ac tion, along came the "garbage crisis." It sounded true enough. Dump closings cre ated pockets of scarcity, and opening new dumps had grown difficult. The very local nature of the business meant that few officials knew much about the trash mar ket beyond their own backyard. Then, in 19S7, the idea of a crisis was fixed in the national consciousness as a barge heaped with 3,186 tons of New York state garbage drifted hopelessly for five months in search of a dump. Rejected by dumps and incinerators in nine locations along the Atlantic coast and in the Carib bean, the trash returned to New York state and was burned. Suddenly, dump fees were like oil ! prices in the late 1970s-unbelievably high but certain to go higher. Handy Concept The garbage companies didn't invent the notion of a capacity crisis, but it has worked to their advantage. And efforts to : perpetuate it continue. The National Solid ; Waste Management Association issued a report last month declaring that "landfill ! capacity in North America continues to deI dine." In an accompanying press release, . the trade group warned that "escalating disposal costs will continue" unless siting new dumps becomes easier. TF^However, one of the report's authors, Susan K. Sheets, says she doesn't believe .capacity is dedining and says that the assodation's public-relations person was Please Turn to Page A8. Column 4 ' ' - Space Available: Economics of Trash Shift in Favor Of Cities as They Learn Dumps Still Have Room Continued From First Page responsible for that conclusion. "We didn't put that in our report," Ms. Sheets says. The PR man, "Allen Blakey, wrote it." Mr. Blakey says he believes capacity is declin ing and says the conclusion wasn't altered to fit the industry's agenda. But even some industry executives call the purported trash crisis a bunch of rub bish. Currently, only .New York and .New Jersey among major markets face a seri ous capacity shortage, and both states border Pennsylvania, where there is a glut . of dump space. "This perceived capacity crunch - I don't know where it is," says Hugh Dillingham, a Browning-Ferris vice president. It has nevertheless frightened many municipalities. "We were at their mercy," says Phyllis Barry, an official in Ovster Bay Township on New York's Long Island. The last three years. Oyster Bay paid Waste Management, based in Oak Brook, 111., S101 a ton, then Sill and then S117 to lake its 175,000 tons of trash a year. When the township finally put the work out to bid, it discovered how badly it was overpaying. Browning-Ferris, based in Houston, earlier this year agreed to take ; the trash for S77 a ton, a $7 million annual i savings. Even at $40 a ton less, Browning* j ' Ferris says the work is profitable, j Waste Management denies any price i gouging on its part. "Our rates were not I out of line," a spokesman says. "It really is a reflection of the market." . Some municipalities know they're pay* ! ing too much but can't do anything about it. At S131 a ton, suburban Morris Qjunty, N.J., about 25 miles west of Manhattan, .. will pay S49.8 million to dispose of this year's expected 380,000 tons. Morris County must pay that rate through the end of 1994 in part because it allowed a single company. Chambers De velopment Co. of Pittsburgh, four years ; ago to step in and gain control of the county's only two disposal outlets. "That ' lack of control really costs us," says Glenn i Schweizer, the county's trash czar. "The rates are excessive," Chambers says the rates are reasonable. To be sure, household garbage bills aren't headed back to S5 a month. Dis- ' posal, with environmental safeguards, will remain costly. And a lot of trash has to .- ` travel farther these days as scores of town t dumps close and are replaced by big / regional sites. -' But overall, the supply of dump space V-' f exceeds demand, and that should send * prices down in some areas and keep them L-rAi- from rising much ih others. Investment f :A; dollars poured into the dump business in % recent years chasing the high profits. The cost of building and operating a dump ^'-YArarely exceeds S30 a ton. In most cases, the t^T cost is far below that. Capacity Levels Browning-Ferris has more than 485 lion tons of capacity at its 100 dumps, Bste Management won't disclose the >acity of its 130 dumps, but probably has between 650 million and a oiinon tons of space. Together, their daily permitted volumes could handle 70% of the nation's trash, estimates Douglas R. Augenthaler, a trash-stock analyst at Oppenheimer & Co. Other companies, including Chambers, Laidlaw Inc. and Western Waste Indus tries, have added to their dump space, too. Meanwhile, companies and municipali ties have invested heavily in trash inciner ation, which burned about 16% of the nation's volume last year. That could grow to 25% by the year 2000, and recycling could roughly match that amount. If so, the volume going to dumps could drop from the current 130 million tons to less than 100 million tons by the end of the decade, even as total trash output rises to 210 million tons a year. Municipalities didn't see this coming, of course, and many still haven't taken advantage of the oversupply. In Pennsyl vania, a late-19S0s surge in dump permits, part of a state effort to avoid a crisis, has given the state about three times the permitted capacity it needs to handle its 25,000 tons a day. Waste Management alone could handle all the state's trash with its Pennsylvania dumps. Yet prices, at $35 to $60 a ton, remain relatively high. Under a 1988 contract, Philadelphia is paying Waste Management S67 a ton through 1994 to take the city's 850,000 tons a year. "It looked like a good deal at the time," says Jack Siderer, the city's chief sanitation engineer. In March, Phila delphia signed new contracts for 1995 through 2001 at about S50 a ton with Browning-Ferris and Waste Management. The city will save about S2Q million a year. Other cities have taken notice. Pitts burgh's contract with Chambers is up at the end of 1993. And Robert A. Lewis, assistant planning director, has news for the company: The new price will be "the same or better" than the 1993 price of $38.17 a ton. Elsewhere, municipal efforts have gone far beyond simply knowing the market and driving a harder bargain. Palm Beach County, Fla., spent S420 million to build its own incinerator, dump and other disposal facilities. Household bills there have more than quadrupled since 1980 to about S21 a month. But the county hopes public owner ship will help insulate it from future pri vate-sector price increases. Running a Monopoly The state of Delaware used high dump fees to finance its own dumps in the early 1980s. In the last few years, however, neighbor states reliant on the private sector have been paying more than Dela ware's $43.51 to $49.60 a ton, says N.C. Vasuki, the state's trash chief. Municipalities have some advantages over the trash companies. Cities' borrow ing costs are often lower, and they don't pay taxes or look for profits. And they can legislate so-called flow control, which gives them the power to steer all the trash within their borders to their own dump - a monopoly. "Anybody who can walk and chew gum on a clear day ought to be able to beat out the private sector," says H. Lanier Hick man, head of the Solid Waste Association of North America, a group of mostly municipal waste officials. "We're learning to compete with the private sector." ; In Los Angeles County, the nation's largest trash market, and in big Texas cities like San Antonio and Dallas, officials are fighting to preserve municipal con trol of dumps. Losing that control could cost Los Angeles County S350 million a year in added dump fees, officials estimate. - Even in Waste Management's back yard, the Chicago area, municipalities are fighting back. In the northern suburbs. Lake County has essentially said no to any private-sector dump or incinerator project and instead plans to build its own. "Owner ship is key" to controlling costs, says Bill Barron, deputy county administrator. Cities in northern Cook County have banded together to build their own dump, too. And to the west, in DuPage County, where Waste Management and BrowningFerris each operate a huge dump on Forest Preserve- land, beginning- this month the companies get to keep only $16 of the $2S-per-ton fee. Says Wallace H. Brown, a Forest Preserve official: "Munic ipalities now have assurances they're not being taken to the cleaners." CTL007508 I