If the Board of Supervisors approves the recent offer from Allied Waste Industries, the county of San Diego will become the largest municipal government to sell its waste disposal system to the private sector.
For decades, the county system has been the burial ground for nearly all of the trash generated in the region, outside of the city of San Diego. Now, the county has decided it is simply no longer able to run the regional solid waste disposal system. In light of the county system's recent shaky history, that's a very rational conclusion.
It's difficult enough for a government to run like a business, despite the aspirations of elected officials. Business managers and boards of directors can speak freely in private meetings or confidential memoranda. The Board of Supervisors can only meet in public, and the written words of county managers are public records that may appear in the morning paper. Businesses do not have to hold a public hearing when they want to raise their rates; governments do. And while businesses can charge what the market can bear for their products or services, governments cannot. A California local government that charges more than its costs is charging a tax, which is legal only after a two-thirds approval of the people. These protections may be great for running an honest government that is responsive to the public, but they are terrible for running a profitable business that is responsive to the market.
Landfilling is also a lot more complex and costly than it used to be. In the 1960s, landfilling was simply filling holes with trash, then covering it with dirt. Now, landfills are heavily regulated, complex engineering projects. Regulations enacted in the 1980s and 1990s require that landfills be built on top of liners made with materials costing hundreds of thousands of dollars per acre. Any liquid that percolates through the trash must be captured with a collection system before it reaches groundwater or surface water. Methane gas produced by decomposing trash must be captured and destroyed. Landfill operators must test the air and water around their landfills monthly or quarterly, and regulators inspect them weekly or monthly. Each of these improvements in landfill design and operation puts previously unknown pressure on the county's bottom line.
Adding to these difficulties was the county's great blunder: the recycling plant. In 1991, the county abruptly abandoned plans for an incinerator, but still approved a $134 million recycling plant. It did so without any commitment from its 17 customer cities that they would deliver the 550,000 tons of trash per year that the county had promised to the plant operator. One supervisor assured his colleagues, "There will always be enough trash." Not so. The recession hit San Diego just after the deal was being inked, and trash shipments decreased. The plant operated well enough -- it recovered and sold tons of recyclable material that would otherwise have been buried -- but for a variety of reasons never received the amount of trash it needed to be economical.
Increased landfilling costs, payments for the recycling plant and declining income combined to bury the county trash system in a deep financial hole. When the county raised rates to meet its expenses, it had to raise them so high that it became cheaper for trash haulers to dump their waste out of the county; this depressed revenues even more. And as if this wasn't trouble enough, the U.S. Supreme Court ruled that it was unconstitutional for a government to pass a law requiring that trash be disposed of at the public's landfills.
In the past year, the county's business-minded administration did a good job of cutting costs and keeping rates low enough to retain its customers. However, the only real hope for the county trash system in the long run is that the cities of the region or their franchised waste collectors would voluntarily commit to bringing their waste to county landfills for the long term. This is what the cities of Orange County did after their county declared bankruptcy. A commitment of waste stream to the system tells the county how much waste it needs to plan for, how many employees it needs, and what new facilities it needs to build. A reliable waste stream also gives a landfill operator the secure income stream it needs to borrow capital improvement funds at low interest costs.
The county tried to get these waste-stream commitments from the region's cities from 1989 to 1996. Seven cities deserve great credit for joining the county in the Solid Waste Authority in 1994, but they never controlled the amount of trash necessary to assure the long-term solvency of the system. By 1996, it was evident that the larger cities would just not join the effort. The county bears some responsibility for being less than diplomatic; most of the discussions about waste flow commitment took place in the course of litigation between the county and the cities. But the county does not bear all of the blame; no mayor or trash hauler was able to collect the waste stream commitments that would have supported and saved the regional public system.
The sale to Allied will give the county enough money to pay off the county's trash debts, and plenty of funds to maintain all of the closed landfills the county isn't selling. The county plans an "environmental trust fund" for this purpose. However, funds like these were an attractive source of borrowing for former Boards of Supervisors. At one point, the landfill closure fund paid $6 million to buy a building for the sheriff. The county should ensure whatever funds it sets aside in its trust fund are "hands off" for non-landfill purposes.
Finally, if the region is to move from the public sector, where prices are controlled by the government, to the private sector, where prices are controlled by the market, we will need to encourage competition. Since 1994, the county has faced aggressive competition from Orange County, Los Angeles, and Arizona landfills. The cities, the county and the waste haulers should continue to consider and examine the many disposal options available in addition to what will become the Allied Landfills. Healthy competition will ensure the region's trash can be disposed of at a fair price.
Scott H. Peters is an environmental lawyer in private practice in San Diego. He is a member of the county's Integrated Waste Management Citizens Advisory Committee.
San Diego Daily Transcript
Tuesday August 12, 1997
