Colossal Waste

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After nearly 15 years of working to get New Yorkers into the recycling habit–introducing composting, leaf collection, recycling centers and finally, in 1999, weekly pickups–the city’s Department of Sanitation (DOS) announced last year that the program was too expensive and needed to be dumped. Fighting back, the City Council struck a compromise with the mayor: Glass recycling would be suspended for two years, plastic for one year, and metal and paper pickups would continue.

Under the council mandate, the Department of Sanitation must resume plastic recycling this July. After much foot-dragging and various vague public statements, Sanitation announced in May that it had signed a metal and plastic recycling contract with a New Jersey scrap metal company, Hugo Neu. The company, which handled the metal from the World Trade Center site, will pay the city $5.10 for each ton of metal and plastic it picks up for the next five years.

The Hugo Neu deal, it now appears, comes not a moment too soon. The city doesn’t just issue contracts for recycling; it also pays private companies to haul garbage to out-of-town landfills. And those contracts, City Limits has learned, are going to get more expensive very soon. DOS is now receiving bids from companies interested in exporting Brooklyn’s trash, starting in September. They are showing a jump in the cost of disposal: from $67 a ton currently to an average of $78 a ton for the next five years. At the current volume of 3,745 tons a day of household trash, the bill would come to $107 million a year for that borough alone.

In November, DOS will be soliciting bids for Manhattan’s and Staten Island’s trash, and industry analysts say that the costs are likely to rise again. Looking at the Brooklyn bids and at trends in the waste hauling business, they say the costs for that next round of bids are likely to hit $81 a ton and higher. Garbage export contracts, which started after the Giuliani administration began planning to close the Fresh Kills landfill in Staten Island in 1998, already cost the city more than $350 million a year in immediate costs.

The fee hikes alone are bad news for a city in budget crisis. But with recycling of metal and plastic yet to resume, the situation is even more troubling: Thousands of tons of waste that could have been recycled are ending up as very expensive trash instead. Budget analysts have now joined environmentalists in concluding that Doherty and the Bloomberg administration made a disastrous miscalculation when they suspended recycling–one that the city will now literally be paying for, one ton at a time.

In February, City Comptroller Bill Thompson laid out the losses in stark terms. According to the comptroller’s findings, not only have the savings from cutting recycling not materialized, but the city has dramatically increased the amount of waste that has to be disposed of. “It is now abundantly clear that merely recycling metal and exporting glass and plastic as waste is more expensive than recycling all these materials,” declared Thompson in a sharply worded letter to Commissioner Doherty. The comptroller concluded that full-scale recycling would save the city $16.7 million a year.

For years, Doherty’s agency has been insisting that recycling is far more expensive than disposing garbage. And looked at one ton at a time, that has been true: The current cost of collecting garbage is $66 per ton, disposing of it an average of $75 a ton. Compare that, says Sanitation, with the cost of recycling: $120 a ton to collect, and at least $70 to dispose.

Last spring, Doherty told Mayor Michael Bloomberg that Sanitation would save $40 million out of its $1 billion budget by suspending full recycling. The commissioner said the savings would come from processing glass and plastic under waste export contracts rather than recycling contracts, and he projected significant declines in the total number of truck shifts required to manage the city’s waste stream.

But far from removing hundreds of truck shifts, the Department of Sanitation has suspended only 87 out of 7,000 weekly trash and recycling pickups. Cuts in personnel have been offset by an increase in budgeted overtime payments, to make up for the reduction in manpower. Most damaging, says the comptroller, the confusion surrounding what can and can’t be recycled has led to a lower “diversion rate”–the proportion of trash that gets recycled. It has also shrunk the amount of money that the city makes from selling its metal and paper recyclables, and increased the amount of trash in the city’s garbage stream.

Far from saving $40 million, Sanitation has, at best, saved $11 million by suspending full recycling, asserts the comptroller’s office. “It appears that DOS overstated the savings the city would achieve due to processing glass and plastic under waste export contracts rather than recycling contracts,” Deputy Comptroller Greg Brooks told the City Council at an April hearing.

“There is not a single thing the city did to try and turn this program around,” maintains Mark Izeman, a senior attorney with the Natural Resources Defense Council who has closely followed the cuts in the city’s recycling program. “Every day, government agencies and private companies initiate reforms without completely shutting down their operations. And there is no reason why the city couldn’t have initiated some cost-effective reforms while continuing a program that it had spent tens of millions of dollars building up and educating the public about.”

But aren’t some savings still better than none? Not according to environmental advocates, who maintain that the $11 million figure is still a red herring: Recycling diversion rates, which hit a high after a 10-year campaign by DOS to get the city to recycle–up to 21 percent a year ago–have dropped today to 12.7 percent. Meanwhile, even as the city faces a $3.4 billion budget deficit, recycling trucks roam the city half full.

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And then there’s next year. That’s when, under the City Council’s law, the city must reinstate full recycling: glass, in addition to metal, plastic and paper. Adding glass to the mix makes the job much more expensive. Among other challenges, glass fetches very little money in the recycling market, it weighs a lot, and it has a tendency to break into pieces and contaminate the other recyclables picked up by the same truck. In March, a joint mayoral–City Council task force on recycling anticipated that glass posed the most serious obstacle to the city reinstating full recycling by July 2004, the date the Council targeted.

Once again, Hugo Neu has come to the forefront. Initially, the company submitted a bid for $70 per ton for disposal of recyclables. In May, it reduced its bid again, to $51 per ton, making it on par with the cost to the city for its trash disposal once the higher cost of collecting recycling at the curb is factored in. Explaining the company’s decision to cut its bid to make it more competitive, Robert Kelman, the general manager of Hugo Neu, says his company went back to the table, researched aftermarkets for recycled glass, and decided it could reduce the bid and still see a profit. “We recalculated our numbers and we found some market development that could further develop [profits] on the glass side and still amortize our investment over five years.” So the decision came down, says Kelman, to “push it,” and the bid was lowered by $19.

If the city awards the full recycling bid this summer, Kelman estimates that his company can have a 90,000-square-foot, state-of-the-art separating system built in Hunts Point in the Bronx within 14 months. A recycling center, Kelman is convinced, could spark an industrial rebirth in the Bronx, drawing manufacturing companies to purchase and build with the aftermarket materials produced by Hugo Neu’s recycling facility.

But while cost is no longer an obstacle, Sanitation has not moved forward to issue the contract for metal, glass and plastic. The metal-and-plastic contract with Hugo Neu has also been delayed, at least temporarily. At a City Council hearing in May, Sanitation Commissioner Doherty asserted that funding for the contract was tied up in the state budget morass. More precisely, says Councilmember David Yassky, co-chair of the council’s Sanitation and Solid Waste Management Committee, Sanitation is waiting to see whether or not the legislature prevails in winning tax hikes and other measures to bring in more revenue for New York City. If not, DOS will probably look to cut recycling further.

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Few observers want to say it out loud, but the 800-pound gorilla in the room is Waste Management Inc. According to figures collected by DOS, Houston-based Waste Management handles 58 percent of the city’s trash–almost all the residential waste from Brooklyn and the Bronx, one-third from Queens, and all of Staten Island’s trash. It also collects and dumps a significant portion of the city’s commercial waste stream.

Waste Management is a company that is built on realizing profits from trash, profits that increase with volume. Since its creation in 1968–consolidating two waste companies in Chicago and one in Florida–Waste Management has grown to be the world’s largest trash handler. In the process, it has left in its wake hundreds of investigations into fraud, price-fixing, toxic dumping and criminal conduct. In June 2000, the company settled a complaint with the Securities and Exchange Commission, which charged that, among other violations of accounting procedures, the company had misled investors by overestimating volume at landfills and raising prices to levels that clients simply refused to pay.

Without admitting or denying guilt, the company agreed to restate its profits, but it didn’t get off so easily with shareholders, who through a class action lawsuit forced WMI to cough up $457 million in penalties. Then, in March 2002, the SEC charged six former top-ranking executives at WMI with hiding earnings, selling stock at inflated prices, and failing to record millions of dollars in expenses related to unsuccessful landfill development projects. When the improper accounting was revealed, stock prices dropped by 33 percent, costing shareholders over $6 billion. The company later admitted that, between 1992 and 1997, it had overstated its profits by $1.7 billion.

Any company that competes to take away trash and turn it into recycling is a threat to Waste Management, points out Peter Anderson, a consultant with the Center for a Competitive Waste Industry, a nonprofit that tracks the waste management industry. “For the past 20 years, Waste Management, Allied/BFI and Republic have been trying to lock down control of landfills, because if you can’t empty a truck in a landfill, you can’t compete” in the garbage export market, points out Anderson.

According to the San Diego-based newsletter Solid Waste Digest, Waste Management owns 17 of the 42 landfills in the greater New York area. The biggest two, in Pennsylvania, take upwards of 5,000 tons of trash from New York City daily.

“Everybody knows that costs in the solid waste market are going up,” observes Kelman. “There’s only a few companies that can handle the volume” put out by New York City. As landfills start to close up, he says, the city will have to search farther afield for alternatives. “People know they have New York over a barrel.”

The farther waste haulers have to travel to deposit trash, the higher the costs. Last summer, Pennsylvania upped its surcharge on all waste coming into its landfills from out of state from $2 to $4 a ton, points out Tom Outerbridge, president of City Green, a recycling company in Manhattan. Not only are landfills near the city filling up, “but there may also be some cost increases that are simply the opportunity the private sector sees in charging a higher fee, because they have a corner on the market.” Outerbridge cites a survey put out by Solid Waste Digest, estimating a 63 percent price increase at mid-Atlantic landfills by 2010.

“The handwriting is on the wall. Everybody and their brother in the waste industry knows that New York City is completely incapable of dealing with its own solid waste, because it has no solid waste disposal system,” observes David Biddle, executive director of the Greater Philadelphia Recycling Council, a nonprofit that develops solid waste management programs. Of course costs were going to rise for New York City, maintains Biddle. “It’s market economics. You guys don’t have landfills. You have limited space, you are asking companies to handle ungodly amounts of solid waste whether you recycle or not…with limited landfills, that’s just supply and demand.” A bigger problem is coming down the road, warns Biddle. New York has been trucking its waste to counties surrounding Philadelphia for years, and in five years, he estimates, there will be a big problem: Philadelphia and New York will compete for the same landfills, driving up costs on dumping fees even further.

Meanwhile, Pennsylvania, under pressure from residents unhappy about being the region’s dumping ground [see “Wretched Refuse,” November 2002], has ceased issuing permits for new landfills. It is also stopping garbage trucks for even small violations. “If Pennsylvania dries up, which is what Pennsylvania is trying to do, the haul cost could essentially double,” agrees Peter Anderson.

Waste Management maintains that it’s offering a fair deal for New York, on recycling as well as waste export. (It bid on the recycling contract, at $82 a ton.) A New York lobbyist for the company, former City Council Speaker Peter Vallone, says the company is the best equipped to handle the city’s recycling, because it already handles 75 percent of the city’s trash. “I think they do a good job,” says the former speaker, whose lobbying firm, Constantinople Consulting, is on a $15,000 a month retainer with Waste Management. When asked why Waste Management’s bid to handle the city’s recycling was so much higher than Hugo Neu’s, at $82 versus $51 a ton, Vallone dismissed the question. “I wouldn’t know anything about that,” he says, adding that Hugo Neu may be tallying up costs differently than Waste Management in its bid proposals. “I would check that disparity–that they’re counting different things.”

But Vallone’s old council colleague, Sanitation and Solid Waste Committee legislative attorney Carmen Cognetta, says the city can’t afford the status quo. “This is a tremendous expense,” says Cognetta of the cash paid to companies like Waste Management to remove the city’s daily trash. “Twelve thousand tons a day, six days a week, 52 weeks a year–and multiply it by an average of $70 per ton. The more you recycle–the less [trash] you send out–makes it less expensive. The question is, how do you make it work?”

Recycling supporters inside and outside the city government say the problem is not just that the garbage hauling-and-dumping companies are doing business as usual–it’s also a business-as-usual mentality that pervades Sanitation. Change “takes leadership,” points out Cognetta. “You need leaders who talk about what will happen down the road.”

Visy Paper in Staten Island had to make a serious effort at lobbying before it won the bid from Sanitation to handle the city’s paper recycling, paying the city $7 per ton it picks up. The example illustrates Sanitation’s reluctance to think outside the box, says Yassky: “It tells you that the Department of Sanitation is very good at running a fleet of trucks and picking up trash, but it is absolutely terrible at managing the garbage problem in a creative and innovative way. It has an absolutely zero track record on that. They insisted that recycling was a sinkhole, and then Hugo Neu comes along and says we will actually pay you for the plastic and metal.”

In Yassky’s view, Sanitation’s vision crisis goes much deeper than a failure to embrace specific innovations. “This is the most jerry-rigged, Scotch Taped-together policy operation I can imagine,” says Yassky. “We fell into a way of getting rid of trash when Fresh Kills was closed. The city had no idea how to get rid of [its trash], and did whatever they could to get through the week. Here we are five years later, getting through the week without any long-range planning for a more rational solution.”

Kelman says his company has been moving ahead with its plans to build the Bronx recycling facility, and it has already located industries, such as paving stone companies and construction businesses, that can use recycled glass in their manufacturing. The site will have the capacity to load and unload barges simultaneously–cutting down on the cost of truck trips moving recyclables around and outside the city. And plans are being laid for the facility to be able to handle paper recycling, along with plastic and metal.

“The city is going to be pleasantly surprised” with the cost savings it will see if it awards Hugo Neu the full recycling bid, predicts Kelman. “We’re so confident of the true market–even if we lose the bid, we don’t lose.” Looking out for its own business interests, Hugo Neu has also proved something of great public benefit: For the city, recycling works, and pays.

As Kelman sees it, the garbage hauling corporations are never going to be good at promoting recycling, because their business model depends on large returns, which they need to pay off debts they incurred buying big landfills. Recycling, he believes, calls for an entirely different kind of economic thinking–but one that’s less rigorous. “In the end, recycling has got to be a business,” says Kelman. “And it has to be a good business, otherwise it won’t work.”

Ruth Ford is a contributing editor at Habitat magazine.