Charges for Services – Institute a Pay as You Throw Garbage Collection Fee

 Revenue: $125 million

Currently, the City collects garbage from 600,000 City households.[1]  Residents of 1 to 4 unit buildings are eligible for free garbage collection.  Each building is provided with two to four 96-gallon black garbage carts that are semi-automatically lifted and emptied into the City’s garbage trucks.

Under this option, the City would begin charging for City-provided garbage collection services by implementing a pay-as-you-throw (PAYT) system.  Using the City’s existing garbage infrastructure, the City would charge property owners $100 per year for each 96-gallon garbage cart the building used.[2]  Billing property owners instead of each individual household would make administration easier for the City and is similar to the City’s method of billing for water service.[3]  Property owners would have the option of reducing or increasing the number of carts they use.

Currently, there are approximately 1.5 million 96-gallon garbage carts in use in the City.[4]  At $100 per cart, this translates to total potential revenue of $150 million.  However, two factors are likely to offset this potential revenue increase.  First, it is likely that in response to charging for garbage collection, City residents will reduce the amount of garbage they throw out and decrease the number of garbage carts they use.  A study conducted for the Environmental Protection Agency (EPA), found that PAYT reduces “residential disposal by about 17%.”[5]  If in response to charging for each cart, the number of carts in use was reduced by 17%, approximately 1.25 million carts would remain in use, translating to annual revenue of $125 million.

The other factor that will reduce the net revenue from a PAYT system is that the City will need to spend money to bill and collect revenue from property owners.  For comparison, in 2011, the City budgeted $8.4 million, including healthcare and pension costs, to collect and bill fees associated with water service.[6],[7]  Assuming it would cost the City a similar amount to administer the billing and revenue collecting aspects of PAYT system, the revenue collected through a PAYT system would be offset by $8.4 million in increased costs.

Finally, there is an additional savings that the City would achieve through PAYT.  If residents were to reduce the amount of waste they dispose of annually by 17%, the City would reduce the amount of waste it disposes annually by approximately 150,000 tons.[8]  The City pays approximately $47 per ton to dispose of waste, meaning that a reduction of 150,000 tons would save the City $7.05 million in disposal costs.[9]

The table below summarizes the different impacts on revenue.

Revenue Impact

Revenue from $100 charge per cart for 1.5 million garbage carts

$150,000,000

17 percent reduction in cart usage

($25,500,000)

Billing and collection costs

($8,400,000)

Waste disposal savings from 17 percent reduction

$7,050,000

Total

$123,150,000

Thus, the implementation of PAYT system, in which property owners were charged $100 per garbage cart, would raise approximately $125 million annually.

Proponents might argue that PAYT would incentivize conservation and more recycling, which would reduce the amount of trash being throw out, which will reduce the cost of garbage service to the City and is better for the environment.

 

 

Opponents might argue that garbage collection services should be part of property taxes and residents should not have to bear an additional cost for this service.  Simply charging residents for each cart could induce some people to pay for fewer carts then they actually need and then dump their garbage in other people’s carts.

 

 

 

Budget Details

Fund: NA Type of Revenue: NA
The appropriations for revenue begin on page 16 of  the 2011 Annual Appropriation Ordinance.

http://www.cityofchicago.org/content/dam/city/depts/obm/supp_info/2011BudgetOrdinance.pdf

 

 


[1] City of Chicago. Department of Streets and Sanitation. Sanitation (Garbage Collection, Street Sweeping and Residential Recycling)

http://www.cityofchicago.org/city/en/depts/streets/provdrs/san.html

[2] There are several different ways to implement a PAYT system.  Approaches include a subscribed can or variable can system, in which users pay a fee based on the number and/or size of the garbage cans.  There are also bag programs, in which users “purchase bags imprinted with a particular city or hauler logo, and any waste they want collected must be put in the appropriately marked bags.”  The City’s failed blue bag program for recyclable falls into this category.  Additionally, there are tag or sticker programs which “are almost identical to bag programs, except instead of a special bag, customers affix a special logo sticker or tag to the waste they want collected.”  Also, there are weight-based programs that attempt to charge users based on the actual weight of the garbage they throw out.

Source of Description of Different PAYT System Descriptions:

Skumatz, Lisa A., Ph.D. and David J. Freeman. “Pay as you Throw (PAYT) in the US: 2006 Update and Analyses.” prepared for US EPA and SERA, by Skumatz Economic Research Associates, Superior CO, December 2006. pg. 3.

http://www.epa.gov/osw/conserve/tools/payt/pdf/sera06.pdf

[3] While property owners would be billed for the PAYT system, it is likely that some portion of the cost of garbage collection would be passed from property owners to their tenants in the form of higher rents.

[4] City of Chicago. Department of Streets and Sanitation. “Request a Garbage Cart.”

http://www.cityofchicago.org/city/en/depts/streets/provdrs/rodent/svcs/garbage_cart_distribution.html

[5] Skumatz, Lisa A., Ph.D. and David J. Freeman, “Pay as you Throw (PAYT) in the US: 2006 Update and Analyses”, prepared for US EPA and SERA, by Skumatz Economic Research Associates, Superior CO, December 2006. pg. 1.

http://www.epa.gov/osw/conserve/tools/payt/pdf/sera06.pdf

[6] City of Chicago. “2011 Annual Appropriation Ordinance.” pg. 261.

http://www.cityofchicago.org/content/dam/city/depts/obm/supp_info/2011BudgetOrdinance.pdf

[7] Of the $7.27 million, Revenue budgeted $3.29 million in personnel expenditures.  Assuming that fringe benefits are 35 percent of salary, the fringe benefit cost $1.15 million, which brings the total budget for this function to $8.42 million.

[8] The City estimates that in 2010 it collected and disposed of 905,500 tons of solid waste.  17 percent of 905,500 is 153,935.

City of Chicago. “2011 Program and Budget Summary.” pg. 204.

http://www.cityofchicago.org/content/dam/city/depts/obm/supp_info/2011_Program_and_Budget_Summary.pdf

[9] In 2011, City budgeted $42.3 million for waste disposal costs.  Assuming the City disposes 905,500 tons of waste this equate to $46.71 per ton.