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Why unit pricing makes sense for solid waste.

As announced in last week's Nation's Cities Weekly, the U.S. Environmental Protection Agency (EPA) is seeking applications from communities interested in participating in the agency's residential solid waste unit pricing demonstration project.

What is garbage unit pricing, and why should cities and towns want to take a closer look at it?

Solid Waste Fee Structures

In most of the U.S., garbage is removed once or twice a week with funding coming from some portion of property taxes or from fixed user fees.

Neither method gives any incentive for residents to recycle or to reduce their waste.

In the property tax method, residents receive unlimited trash pick-up but never see a solid waste bill. Waste costs are "buried" in the general property tax rate. Citizens have no idea how much it costs to collect and dispose of refuse every week. There is no incentive for residents to recycle or reduce their waste.

In the fixed user fee method, residents also receive unlimited trash pick-up, but pay a waste fee separate from their property tax bills. Trash rates are set, and periodically raised, to cover waste collection and disposal costs. But rates are flat for the life of the rate period, no matter how much waste a resident throws away. Like tax-funded systems, fixed fee waste arrangements provide no incentive for citizens to reduce waste.

In both the tax and user fee systems, mandatory versus voluntary recycling is not a key factor. Without a variable pricing mechanism in place for nonrecyclable waste pick-up, neither arrangement creates an economic incentive for residents to recycle or reduce their waste.

Unit Pricing

The deficiencies of property tax and fixed user fee arrangements are why "pay as you throw" waste fee systems have become more popular in recent years.

Most waste managers view unit pricing systems as an equitable way to increase residential recycling and composting, send appropriate conservation and pricing signals to consumers, and help cities reduce landfill tip fee costs.

Unit pricing systems also give residents a realistic picture of what waste collection and disposal actually costs, while permitting customers to retain some choices and control over their bills.

Unit pricing systems for nonrecycled trash usually employ variable per-can volume-based fees or per-bag rates.

One of the first large scale tests in the U.S. of solid waste unit pricing was the introduction by Seattle, Washington, of a "variable can rate" waste user fee in the early 1980s. Designed to accompany and promote the city's voluntary recycling program, the rate design provides clear monetary incentives for residents to recycle more, and throw away less.

Seattle residents subscribe to a weekly level of collection service for nonrecycled trash, offered in 30-gallon can increments or in a "super-recycle" 19-gallon mini-can option. The current monthly single-family rate for once-a-week curbside or alley mini-can pick-up is $11.50; the one-can rate is $14.98; pick-up of two cans/week costs $29.96 per month; and three cans costs $44.94. A 40 percent surcharge on these rates is imposed if residents want backyard waste pickup.

In designing the rates, Seattle divided its rate "pie" into nine separate costs elements. Four elements were minimum charges for recycling, landfill closure, billing, and low income rate credits. Four elements were tonnage charges for waste disposal, variable collection, program administration, and taxes. The final element was a fixed collection cost, basically a truck "stopping" charge.

Per-bag fees are common in rural areas where citizens drop off their trash at the local landfill.

A growing number of municipalities that collect trash also have adopted per-bag fees.

The trend toward unit pricing for garbage service seems likely to continue.

Unit pricing systems are equitable, since customers pay only for the amount trash they throw away. Unit pricing relies on market forces and does not favor any one kind of waste reduction measure over another.

With unit pricing, residents who practice waste source reduction, backyard composting, and recycling receive a clear reward--lower rates--for doings so. Waste "watchers" do not subsidize waste "hogs" through the waste pricing mechanism.

Finally, waste unit pricing systems can be accepted fairly readily by consumers, since they are similar to utility pricing mechanisms already in place for gas, electric, water and sewer, and telephone services.

For more information on the EPA demonstration project, call Dr. Deborah Nestor at (202) 260-5500; fax, (202) 260-6405.
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Title Annotation:Environmental Protection Agency project
Author:Fletcher, Jeff
Publication:Nation's Cities Weekly
Date:Oct 19, 1992
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