What is privatization?
In privatization some or all of the management, ownership, and tasks for a government operation are shifted to the private sector. One of the most common forms of privatization is the selection of a private entity to deliver a service that previously was supplied by local government and public employees. Essentially, a local government is outsourcing a service. Recycling and garbage collection and disposal are increasingly becoming one of these services.
A 2007 report by the International City-County Management Association found that over 57 percent of suburban governments, 39 percent of rural towns, and 29 percent of large cities had outsourced residential trash collection. The percentages have increased significantly since then with recent outsourcing by Chicago, Illinois; Detroit, Michigan; Soap Lake, Washington; Uniontown, Pennsylvania; Selma, Alabama, and many others.
Privatization of services may occur in different services, such as collection services – curbside garbage and recycling, special waste, and yard waste; operation of facilities – recycling facilities, transfer stations, and disposal facilities; vehicle maintenance; equipment use and divestiture; staff support; and consulting services.
What methods do local governments use when outsourcing?
Three forms of privatization are used for garbage and recycling management. They include:
Contracting: Government creates a contract for services with the private sector. For example, a municipal government forms an agreement with a company to collect residential waste and recyclables at the curb. This is the most common form of privatization because it allows for very specific services to be defined.
Franchising: This is a lease or concession system where government awards private firms an exclusive right to provide services or operate a public asset usually in return for a payment and subject to meeting performance expectations. For example, a company agrees to operate a government-owned transfer station for a fee and with an understanding that the facility will be kept clean and open during certain day-time hours.
Divesting: This is when government ceases to operate the service in its entirety generally via an outright sale of assets, such as selling a landfill or garbage trucks to the private sector, and allowing the open market to take control of service needs.
What is not privatization?
Some misconceptions exist on the definition of privatization that can cause confusion for local governments and communities when considering an outsourcing option.
History of Service: In privatization, a government is divesting itself of daily management of garbage and recycling operations including ownership of equipment such as garbage trucks and collection services as well as the need for public employees to provide the services. On the contrary, allowing private companies to compete for customers when the local government has not managed the solid waste services prior is not considered privatization.
Government Responsibility: Privatization does not mean that a local government is walking away from its responsibility to its constituents. In fact, outsourcing often leads to increased accountability through the contract process, public-private partnerships, and private company oversight. The services subject to outsourcing are those in which government is not required to physically provide the service. In theory, services provided by local government are public services that could not be provided adequately by the market system. However, in reality, government services are often provided in direct competition with the private sector and often at higher overall financial costs when full cost accounting is taken into consideration.
In addition, where the public sector has been providing a service and decides to outsource, the government maintains a relationship with the private entity to ensure quality and timely service. This ranges from regulatory and enforcement oversight to fee and billing services and contract development and maintenance. In other words, a government may completely step away from any operational activity or may decide to play some operational role.
Politics, Partisanship, and Regulation: While the political climate of a community plays a role in any government decision, privatization is not a partisan issue within the domain of any one political party’s philosophy. The outsourcing decision is about economics and financial responsibility. A November 2014 survey released by the University of Michigan found that 73 percent of officials in areas of Michigan that privatized a public service were satisfied with the results, a finding that cuts across party lines.
Privatization does not constitute deregulation. In deregulation, government removes restrictions on an industry that is already providing services. Companies under outsourced services must comply with any and all local, state, and federal requirements.
Privatization is a government tool that when designed and managed well can promote fiscal responsibility while ensuring quality service. Government maintains responsibility for program over-site while outsourcing program implementation to the private sector. The public-private partnerships created by outsourcing solid waste and recycling services can be vital to municipalities struggling with limited finances.
For more information on how your local government could specifically benefit from a partnership with Advanced Disposal, the following downloadable PDFs are available:
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