Published in the Globe and Mail on February 11, 2011
By Benjamin Dachis
Toronto Mayor Rob Ford’s announcement that he intends to contract out more of Toronto’s waste services is causing reverberations across Canada, not because what’s news in Toronto is news elsewhere, but because this could be the start of a rethinking of municipal waste services in city halls across the country.
Labour contracts in Toronto and Vancouver expire on Dec. 31 – in the last round, agreements in both cities were settled after strikes – and Calgary’s contract with its public employees expired a month ago. Contracting will be a major theme in these labour negotiations.
Most Canadian cities contract out their waste services. But in big cities such as Vancouver, Calgary and Toronto, the public sector has a near monopoly in residential waste services. The debate so far has been whether private competition can deliver less costly waste collection than a public monopoly. Many things affect the cost of collection that makes this a statistical swamp.
It wouldn’t be sensible to directly compare the costs of waste services in Toronto with, say, Timmins because the cities are so different, so my analysis compares cities over time, with factors other than contracting held constant. In this apples-to-apples comparison, a municipality that has fully contracted out its waste services has waste management costs that are about a third lower per household than one that hasn’t done so.
In Toronto, Mr. Ford’s announcement anticipated small initial savings, because the city plans to increase contracting only incrementally. Much of the city’s waste budget is already contracted out, including the operation of a new landfill. Nevertheless, the savings of eventually moving to full contracting could be as much as $49-million a year if all of the city’s waste costs – not just trash collection – were eventually contracted out.
Last year, Windsor contracted out all garbage collection and recycling, and its anticipated savings are in line with the experience elsewhere in Ontario. Windsor contracted all services without laying off permanent employees but could have saved more if it had.
Researchers from the University of Victoria found that Canadian cities with privatized garbage collection have a per household cost about 20 per cent less than publicly operated services. The conclusions from such studies should be heeded not just in Toronto, but in Calgary and Vancouver, where waste service costs per household could fall by a third if they can match the cost savings Ontario cities found with full contracting.
It’s important to know what contracting can and can’t do, because contracting done wrong can leave cities worse off. No city has the power to declare that workers under contract can’t strike. But private contractors have a strong incentive to keep their employees on the job since companies lose money when their workers go on strike.
Competitive contracting can offer a way for public-sector unions to show they can be the lowest cost option by bidding alongside private contractors. This is normal in many cities, and unions win bids more often than not.
Privatization itself doesn’t necessarily reduce costs: Competition results in cost savings whether the services are provided by public employees or private contractors. This was the case in East York before amalgamation, and recently in Ottawa and Port Moody, B.C.: The public unions were able to outcompete private contractors.
Toronto’s jolt to the contracting landscape will have aftershocks that all mayors should heed.
Benjamin Dachis is a policy analyst at the C.D. Howe Institute. His paper Picking Up Savings: The Benefits of Competition in Municipal Waste Services is available at www.cdhowe.org.
