Study: Don’t dump garbage duty

Borough told there’s little benefit in privatizing solid waste management

Posted: Sunday, September 10, 2006

For the time being, solid waste facilities should remain assets of the Kenai Peninsula Borough and their management an in-house operation, according to a group empanelled earlier this summer to review garbage disposal operations.

The Solid Waste Working Group put together by borough Mayor John Williams in mid-June was charged with evaluating the feasibility of selling or leasing solid waste handling operations to a private-sector company. A recommendation that the borough consider privatizing solid waste management made earlier this year by the administration’s citizens transition team led to the group’s formation, Williams said.

Not long ago, solid waste operations were in private hands. The borough took over in 2005 when the company running borough landfill operations, Houston-based Waste Management Inc. (through its subsidiary Peninsula Sanitation) declined to renew its operations contract with the borough and sold its Alaska interests.

The borough created 11 positions to replace former contract positions. Three of those jobs went to borough employees. Eight were filled from a pool of 500 applicants.

The working group included long-time local business owners Darrell Jelsma and Charles Obendorf, Homer fisherman and former assembly member Chris Moss, and former borough mayor Mike Navarre. The group met several times over the course of the summer with borough waste managers, representatives of the finance and legal departments and the administration, as well as Peninsula Sanitation.

At Tuesday’s assembly meeting, Jelsma and Navarre delivered the group’s report.

“The working group’s recommendations were, basically, that the borough should retain ownership (of the facility and its operations), and I guess the reason for that is that there was no way that we could find to eliminate the liability issues that the borough will always have,” Navarre told the assembly. “Selling the facility may actually complicate cleanup and contamination issues in the future with a private owner holding the land and the borough, really, holding the bag.”

Prior to any future sale of the assets, Navarre added, the borough should consult with an expert in solid waste management and conduct an economic analysis of the possible impacts of privatization on the borough and its residents.

Further, the group said the borough should re-evaluate the costs and benefits to the borough of privatization periodically.

Finally, the group recommended that the borough consider commercial and other fees at the solid waste facilities to offset the expense of operations. A blending of all property owners paying for solid waste operations and improvements through a mill levy, and users of the facilities paying a portion through user fees, might be the best method of paying for the required service, the report said.

Regardless of how the landfills are run, costs are going to increase, Navarre said.

Asked about the liability issue. Navarre said it was impossible to avoid altogether the environmental obligations attached to waste dumps. State and federal laws say an entity cannot absolve itself of liability for cleanup simply by selling the property. Thus, eventually, liability costs would find their way back to “the deep pockets,” Navarre said.

The borough spends about 1 mill per year, or about $5.8 million in fiscal year 2007, to operate its solid waste facilities, and gets help through state grants. Operational costs were estimated to be in the midrange compared to other Alaska municipalities. Solid waste was being managed well by the borough, Navarre said.

Under private ownership, according to the three-page report, lower governmental costs (the borough would likely retain some oversight) would be countered by increased fees, most likely borne largely by commercial users.

Also, under the current fee regime, senior residents over 65 do not contribute to paying the cost of solid waste operations because they pay no property taxes. A privately owned facility would be under no obligation to waive fees for seniors.

The group noted that maintaining landfills was expensive and that a profit-minded private concern might not perform maintenance at the same level as the borough. Further, government grants might not be available to a private business, the report said.

“Based on the working group review, private ownership of solid waste facilities and land assets does not appear to be in the best interest of the Kenai Peninsula Borough at this time,” Williams said in a memo to the assembly.

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