A recent telephone conversation has made me think about how we can deal with declining revenues and lower waste quantities while still providing the quality and array of services that our customers (i.e., the public) have come to expect, even in difficult economic conditions. Waste management systems tend to be heavily capitalized, meaning they have a lot of fixed costs that do not decline when quantities decline. Even the more traditional operating costs have a fixed or “readiness to serve” component that is incurred regardless of shifts in quantities. Most systems rely on the tipping fee in whole or in part to generate the revenue needed for the various expenses. When quantities decline, revenues decline, typically much faster than costs decline. So, what is a guy to do?
One answer might be a “Waste generator fee” in which the customers pay a fixed component of charges based on their ability to generate waste. Using different names, this approach is often called economic flow control, but in this instance, I am approaching the issue from a slightly different perspective: not for flow control but for revenue control, at least a portion of the revenue. In its simplest form, this approach would generate consistent revenue regardless of the variations in quantities that stem from uncontrollable circumstances. Rainfall affects quantities but would not affect this revenue stream; holiday seasons can affect quantities but this revenue would be consistent. Similarly, an economic downturn would be less injurious to this source of revenue.
But, you say, what about the political aspects of economic flow control? Well, as we are now hearing, if this was easy, it would already have been done and we could go home. Maybe there are components of this approach that would not work in my community; but maybe some aspects could be implemented. What if this was done for just those customers which are “captured” anyway, through contracts or because the local government provides the service? A two part fee (one part being a waste generator fee; the second part being a truly variable tipping fee) might be more palatable especially to our political leaders who are struggling to finds innovative ways to make ends meet.
Just a thought and maybe we can all weather the storm.
John Hadfield
Vice President, SWANA
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