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July 2002

VARIABLE-RATE OR \u201cPAY-AS-YOU-THROW \u201d WASTE MANAGEMENT: ANSWERS TO FREQUENTLY ASKED QUESTIONS by Lisa A. Skumatz, Ph.D. Project Director: Kenneth Green, D.Env.

POLICY STUDY

295

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Reason Public Policy Institute

A

\ue000 \ue00a \ue001 \ue005\ue004\ue002 \ue000 \

division of the Los Angeles-based Reason Foundation, Reason Public Policy Institute is a public-policy think tank promoting choice, com-

Reason Foundation

Reason Foundation is a national research and education organization that

monthly magazine of \u201cfree minds and free markets.\u201d It covers politics, cul-

Reason Foundation is a tax-exempt organization as de\ue000ned under IRS code

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Po l i c y

S t u d y

N o .

2 9 5

Variable-rate or \u201c Pay-as-you-throw\u2 Waste Management:

Answers to Frequently Asked Questions BY LISA A. SKUMATZ, PH .D. Executive Summary

A

s landfills fill up and recycling opportunities increase, more communities across the nation are interested in reducing waste disposal and its costs. City managers are considering a variety of strategies to

Currently, in most parts of the country, garbage is removed once or twice a week with revenues coming from one of two places: \ue000

A portion of property taxes; or

\ue000

A fixed bill amount that does not vary with respect to the amount of garbage taken away.

Neither method provides an incentive to reduce waste. In fact, with the property tax method of payment,

Variable-rate pricing, or \u201cpay as you throw,\u201d is a new strategy with a growing number of advocates.

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Can Programs. Customers select the appropriate number or size of containers (one can, two cans, etc.,

or 30–35 gallons, 60–65 gallons, etc.) for their standard weekly disposal amount. Residents who use larger cans or numbers of cans are charged more. Bag Programs. Customers purchase bags imprinted with special logos ahead of time, and waste must

be put in the appropriate bag (i.e. yard waste, recyclables, regular “wet” waste, etc.). The price of the bag incorporates the cost of the collection, transport, and disposal of the waste. Tag and Sticker Programs. These programs are almost identical to bag programs, except instead of

using a special bag, customers affix an appropriate sticker or tag that identifies the type of waste they disposing. Hybrid Programs. These programs form a hybrid of the current collection system and a new incentive-

based system. Instead of receiving unlimited collection for payment of the monthly fee or tax bill, the

Weight-based Programs. This system uses a modified scale on trucks to weigh garbage containers and

charge customers based on the actual pounds of garbage set out for disposal. On-board computers record weights by household and customers are billed on this basis. Other Variations. Some communities or haulers offer variable rates as an option along with their

standard unlimited system. Waste drop-off programs, that use punch cards or other customer tracking systems, are also in place in some communities. Some systems are more appropriate than others, depending on local conditions. Larger communities and

Each type of variable-rate system has strengths and weaknesses. Key advantages and concerns are discus

This study demonstrates that rate incentives in solid waste have strong and measurable effects on waste

Ultimately, variable rates can help reduce the burden on the disposal system and lead to more efficient

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Po l i c y

S t u d y

N o .

2 9 5

Table of Contents What is variable-rate waste disposal, and what are its benefits?............................................. 1

recycling? ............................................................................................................................ 14

A. Payment Strategies for Large Families and Low-income Customers............................................................ 17

What are the concerns and advantages of pricing by weight instead of volume? ................. 18

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B. Rate Levels, Steepness, and Program Fees................................................................................................. 24

Howcanwegetvariable-ratewaste-disposalpricingimplementedinourcommunity?....... 26

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VARIABLE-RATE OR “PAY-AS-YOU -THROW ” W ASTE M ANAGEMENT

1

What is variable-rate waste disposal, and what are its benefits? Systems of pricing trash for disposal are known by a variety of names: variable rate, pay by the bag,

Variable-rate programs provide a number of advantages for communities and residents: Equity. Variable rates are fair: customers who use more service pay more. Economic Signal. Under variable rates, behavior affects a bill, regardless of what disposal choices a

household makes. Without variable rates, avid recyclers pay the same as large disposers. Variable rat

Lack of Restrictions. Variable rates do not restrict customer choices. Customers are not prohibited

from putting out additional garbage; but those who want to put out more will pay more. Efficiency. Variable-rate programs are generally inexpensive to implement and, unlike recycling

programs, do not require additional pick-up trucks. They also help prevent overuse of solid-waste

Waste Reduction. Unlike recycling programs alone, which only encourage recycling, variable rates

reward all behaviors—recycling, composting, and source reduction—that reduce the amount of garbag

Speed of Implementation: Pay-as-you-throw programs can be very quickly put in place —one

community installed a variable-rate program in less than three months (although most take longer). Flexibility. “Pay-as-you-throw” programs can be implemented in a variety of sizes and types of

communities, with the broad range of collection arrangements.

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2

Reason Public Policy Institute

What are the different types of variable-rate waste-disposal pricing systems? Variable-rate programs are very flexible, and adaptable to a wide range of community types. They can be categorized into five major types: Variable Can or Subscribed Can. In this program, customers select the appropriate number or size of

containers (one can, two cans, etc., or 30–35 gallons, 60–65 gallons, etc.) for their standard weekly

Bag Program. In this program, customers purchase bags imprinted with a particular logo, and any

waste they want collected must be put in the appropriately marked bags. Bags holding from 30 to 35

Tag or Sticker Programs. These 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. The tags need to be visible

Hybrid System. This system is a hybrid of the current collection system and a new incentive-based

system. Instead of receiving unlimited collection for payment of the monthly fee or tax bill, the

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VARIABLE-RATE OR “PAY-AS-YOU -THROW ” W ASTE M ANAGEMENT

3

The advantages and disadvantages of each of these systems are summarized in Table 1a and 1b. Using the

Table 1A: Advantages of Major Variable Rate System Types

Hybrid System

Variable Can SystemBag/Sticker Systems

Weight-Based

Advantages:

Advantages:

Advantages:

Advantages:

Can often use existingMultiple can sizes Smaller, more flexible More containers (which can help limit can provide increments of service available flexible – – incentives / equity easy to make multiple bag orbetter “scatter”) sticker sizes – harder for cans recycling Can be implemented Using quickly relatively incentive for and inexpensively – easy small first container No billing system needed customers transition from current collection limit can provide except invoicing retail sales because they good incentives for outlets No capital investment for save for every reduction trucks, containers Convenient outlets have bit removed been willing to sell bags/tags No new billing system Containers needed – are sturdy, tend to reduce fairly readily in communitiesfrom container continue to bill using current method, Fair and scatter (sometimes without but now for more limited service easily Rev enues commission in exchange for foot Can design “base” service understood – traffic) amount to community needs –relatively stable customers handle multiple and can modify over time Possible to useEasily used to paying haulers by using colored existing containers if High customer satisfaction sizes are compatiblebags/stickers because “out of pocket” can be Pure bag/tag systems can limited (many will not exceed base Experience in (water, larger jurisdictions be enhanced/modified with electricity, “base” customer charge (fixed), Works with etc.) w hich can be easily billed, and automated collection Can modify system later with Flexible on can reduce revenue volatility little to no w asted expenditure systems a weekly basis Bags and stickers are cheap; Stable revenues becauseUs ing – customers

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4

Reason Public Policy Institute

Table 1B: Disadvantages of Major Variable Rate System Types

Hybrid SystemVariable Can System Disadvantages: Disadvantages:

Bag/Sticker Systems Disadvantages:

Weight-Based Disadvantages:

Supply and distribution system Som e Cus tom er Customers s must don’t have determine their “normal”needed (grocery/convenience stores, systems etc.) take incentive to service level for billing – need to order, distribute, and invoice additional time recycle below purposes distributors at the curb – “base” service don’t Customers must callCustomers to must buy others bags/stickers for level change service levels ALL waste (hybrid or can programs have No city-wide reusable containers for some amount systems of in Need to set System for handling waste) operation in U.S. up bag/tag occasional “extras” beyond to date – many Customers need to store/manage used overseas bags/tags and have bags on hand w hen beyond base Trucks need If standardized they need them – need convenient distribution system w ith long hours to be retrofitted containers to be provided by special community or hauler, Does not work as with easily with need to scales purchase, distribution, and automated collection (unless bags are put and need learn/understanstorage can be expensive in cans, which complicates enforcement)) to label d system and containers with Initial complications Revenue / uncertainties relatively high w here to administration when – revenues depend SOLELY on number of purchase bags customers select initial bags/stickers sold (unless customer codes) Cus tom er levels s (billing, service charge used in conjunction) may not see delivery of containers) More Need to explain to customers how total cost of complicated system works and where to get Coordination required garbage billing system (and expense) as customers system needed w ant to change service because billed Bil l ing variable can programs also) levels in two procedures need Slower collection – Stickers need somewhat more complicated portions. be to return to curb – and to explain to customers (size limits, to etc.) established for empty containers left on Bags may lead to scatter from equipment curb afterward animals (ammonia / vinegar in bag can breakdow ns Multiple containers can be expensive to purchase, store, deliver/re-deliver, and Recycling not encouraged below estimating proportions

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VARIABLE-RATE OR “PAY-AS-YOU -THROW ” W ASTE M ANAGEMENT

5

Who is implementing variable-rate waste-disposal pricing?

The most comprehensive inventory and study of variable rate communities is conducted on a biannual basi

Figure 1: Adoption of Variable-rate Programs by Year, 1980–1998 1.2

The programs became much more common in the 1990s

1 d te p o d A t n e c r e P

0.8 0.6 0.4 0.2 0

p

0 0 97 198 1 re

85 19

90 19

Source: Skumatz Economic Research Associates, Inc, 1997.

95 96 19 19

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6

Reason Public Policy Institute

Figure 2: Variable-rate Communities

SERA’s 2000 survey found more than 5,000* variable rates communities and only 4 states without programs Programs are available to 20% of population.

Key

More than 200 VRP communities 101- 200 VRP communities

*SERA counts only 800 communities in MN; EPA

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VARIABLE-RATE OR “PAY-AS-YOU -THROW ” W ASTE M ANAGEMENT

Figure 3: Variable-rate Program Types

Key

Subscription Can most common Hybrid most common

7

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8

Reason Public Policy Institute

Figure 4: Variable-rate Program Type by Region West

South

East

Central

Total 0%

10%

20%

Variable

Can

30% Bag

40% Hybrid

50%

60%

Sticker

Drop

70% Off

Tag

80%

90%

Multiple

100%

Programs

Source: Skumatz Economic Research Associates, Inc., 2000.

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VARIABLE-RATE OR “PAY-AS-YOU -THROW ” W ASTE M ANAGEMENT

Figure 6: Variable Rate Programs Types By Community Size Large Communities sticker 4%

tag 8%

Small Communities

bag 8%

sticker 11%

tag 4%

bag 21%

multiple 5% hybrid 25% can 47%

hybrid 17%

d/o 8%

can 25% d/o 17%

Source: Skumatz Economic Research Associates, Inc., 2000.

Recycling Programs by Variable-rate Type. Nationwide, the prevalence of curbside and drop-off

recycling programs varies by variable-rate program type.

9

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10

Reason Public Policy Institute

Figure 8: Yard-waste Collection by Variable-rate Program Type

Tag Sticker Multiple Programs Hybrid Drop Off Variable Can Bag 0%

10%

20%

30%

40%

50%

Curbside

Drop

60% Off

70%

80%

90%

Both

Source: Skumatz Economic Research Associates, Inc., 2000.

100%

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VARIABLE-RATE OR “PAY-AS-YOU -THROW ” W ASTE M ANAGEMENT

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Table 2: Categories of State-level Legislation and Policies: Regarding Variable-rate Programs

Levels of Aggressiveness in State Example Involvement Voluntary recommendations

A number of states put variable rate pricing in the State Master Plan o Comprehensive Solid Waste Management Plan.

Active promotion of or education about Many states have funded w orkshops, manuals, new sletter, or case recommended variable-rate strategies studies about variable rate pricing (examples include Illinois and Wyoming). Financial incentives for recommended Some states provide grants specifically for or w ith preferences for strategies community with or considering variable rate pricing (e.g. Massachusetts). Requirements to adopt a subset ofAt a least one state requires adoption of 3 or 5 strategies from a list of 8 menu of strategies

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12

Reason Public Policy Institute

What are the tonnage impacts of implementing variable rates? A variety of sources cite dramatic waste reduction from variable-rate programs in conjunction with other

However, communities expecting this level of landfill tonnage reduction from variable-rate programs alone

To provide specific research information, SERA undertook specialized studies to isolate the impacts that

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VARIABLE-RATE OR “PAY-AS-YOU -THROW ” W ASTE M ANAGEMENT

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How does variable-rate waste-disposal pricing relate to source reduction?

Source reduction is the highest priority for solid waste management, but the contributions these programs

Both approaches developed similar order-of-magnitude estimates of the impacts of the source reduction du

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14

Reason Public Policy Institute

one are usually considered good investments (they “pay back” in a year or less), and this figure implies the

Table 5: Source-reduction Impacts and Cost-effectiveness of Variable-rate Programs

Lower Tons Percent Reduction Disposed Total current variable-rate program impacts 3.5 on million U.S. municipal solid w aste generation (MSW)— includes recycling, yard w aste, and source reduction

Benefit / Cost Ratio

1.6 percent, all MSW 7.6 3.2 percent residential

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VARIABLE-RATE OR “PAY-AS-YOU -THROW ” W ASTE M ANAGEMENT

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Does variable-rate waste disposal automatically increase recycling?

The quantitative work done indicates that the impacts from variable rates are the single most effective cha

Do higher rates or rate bands increase recycling?

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16

Reason Public Policy Institute

before they put in new rates—and since illegal dumping is almost always a concern, illegal dumping will be

noticed, whether or not it actually increases over pre-variable rate levels.

Several studies have attempted to address the issue of illegal dumping. In a survey of public officials in 10

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VARIABLE-RATE OR “PAY-AS-YOU -THROW ” W ASTE M ANAGEMENT

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Is variable-rate waste-disposal pricing difficult to administer?

Anecdotal evidence from SERA surveys indicates that in most cases, after initial efforts to educate custom

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18

Reason Public Policy Institute

current set-outs (volume of garbage and weight of waste set out for collection), remaining recycling potential

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VARIABLE-RATE OR “PAY-AS-YOU -THROW ” W ASTE M ANAGEMENT

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without requiring a variety of different amounts for different materials and waste streams. Advances are

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20

Reason Public Policy Institute

systems may lead the way. Given the significantly improved incentives, labor savings, flexibility in the

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councils are to sensitive to concerns not fixing that are not broken. One city council, forin examp fees(someone tended with leadato“green higher ” reputation levelsabout of recycling might bethan athings likely communities candidate) with who separate is particularly program interested fees (subscriptio the 52 approved variable-rate pricing as a The concept, it for the next council to deal with the issue the aact or mandatory strategy, and linewho items sets onthe bills). groundwork onbut theleft issue. Periodic briefings with council members over same research indicated that embedded yard-waste feesof also rates to beyard-waste charged. The most familiar important issue is to provide information residents, the press, and will increased period of time to get diversion. them However, with the thepolicymaker issues —the has problem to make thatato exists, choice. how Even the though new system higher yard stakeholders the purpose of the change, theofare community hopes tosimilar achieve through theno waste help program solveabout it,diversion and good results or appropriate when no separate case what studies fees successes charged,in this other fee structure communities provides —change, will incenti help how togathering make theinpolitical program work for customers. for composting In the firstsupport, place— the itresidential ischeapest important method to work forwith managing or through the waste. a council Some member fees— who but will certainly be ab

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long8) paper, 5) 4) asathe often Ordinances Make Use free community logos first ignored. suretag, and collectors andhas etc., other The fines the questions along for helpful understand basic illegal with outline items answered dumping, a detailed the that of what program relate etc. should description it isto — trying include they the integrated to are ofaccomplish, why how a crucial isthe itarray an system link important the ofin fine programs. works. communication; points problem, This of exactly helps andmake how

how9) customers 6) 5) that the Reminders Deal Tie happens familiar new with with system available can opponents about with bewill the subject collection recycling contribute program, or bad to days. design and press and toother and the coverage gives revisions solution. waste-reduction them immediately; actual that would materials opportunities; help the with system which andwork to begin better participatin for all

involved In addition, 7) Phone 6) 10) Consider Provide parties. it is numbers updates recommended establishing Haulers for on can where progress often athat task to make get the force inmore the new very that paper information system useful includes and suggestions bethrough phased on representatives the program. in. other that For accomplish outreach the from firstaand few wide thekeep weeks, same variety council goal tags ofand favorabl should membe make left indicating the program that work wastemore was collected, smoothly. but in the future, tags will need to be acquired by customers.

One city left extra waste error-tagged for one day and then returned to collect it all the next day to giv

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Economic Research Associates, Inc. (SERA). She is especially known for her work in variable-rate waste disposal, and her quantitative work measuring the impact of recycling, yard waste, and source-reduction programs. Much of Dr. Skumatz’s recent work has focused on developing strategies and programs to

revitalize recycling at the state level. SERA (www.serainc.com) specializes in the economics of solid-waste management, especially program evaluation and cost-effectiveness, rate studies, incentives, integrated

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11 19 12 20 13

Annual Report on the Borough ofAgency, Perkasie: Per-bag Disposal Fee, Waste Reduction, and Recycling Program for the “The Prepared U.S. the California Environmental for Chapters Region Protection of10 Solid (Seattle: Waste Association Pay As You Economic Throw of North Manual Research America (Washington, Associates, (SWANA) D.C., and Inc., Skumatz 1994); 1990); Lisa Economic A. A.Skumatz, Skumatz, Research This Sk umatz, makes Measuring anEPA assumption Source that Reduction only half .Skumatz of the municipal solid waste is residential in origin.Lisa Year (Perkasie, PA: Economic Borough Perkasie, 1989); Daniel Blume, Under What Conditions Should Cities Adopt1997); a State1988 “Forecasting Associates, of Variable Inc., Solid-waste (Seattle: Rates: Tonnage: SkumatzofSignals Economic Techniques Move Research and intoAlternatives the Associates, Mainstream,” to Inc., Estimate Resource 1999). Tonnage, Recycling Revenues, (updated Source-reduction, August Sk These umatz, Nationwide round figures Diversion for illustration RateReport Study purposes. .Variable The accurate figures were shown elsewhere in the report: 5–6 perce Volume-based Pricing for Residential Solid-waste Collection? ,Biocycle Master’s Memo Study, Duke University, prepared forLisa Lisa Program A.are Skumatz, Performance,” “Continued Research Growth for 9599-1 (Seattle: Rates,” Skumatz (November Economic 1995); Research Lisa Associates, A. Skumatz, Inc. and 1995); John A Green, Skumatz, Growth Variable in Variable Rates for Rates: Municipal Progress Solid and Waste: Results Implementation, (Seattle: Skumatz Experience, Economic Economics, Research and Associates, Legislation , Inc., Policy 1999). Garth W. Frable and Michael Berkshire, East Central Iowa Council of Governments and Iowa Department of Natural Study No. 160 (Los Angeles: Reason Public Policy Institute, June 1993). The U.S. EPA attributes a 25 to 45 percent reduction in landfill tonnage from these programs.

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24 32 38 25 33 39 26 40

implementation ratio somewhat is 2.2;fair. if program Participants costs, costs and that are inpractical Seattle’s $5 theand economic landfill “Garbage incentive are $50, sticks—i.e. Pound” the ratio survey that is 1.7. each found The year the percent users weight-based of keep municipal their rate generation solid to be waste fair down and i Ib This id. strategy was reported as even incosts coldby orthe icy climates. response to assumed appreciated to be the knowing residential rates.what Payback also theyaffects periods were paying these for the computations. for. recycling These results and yard-waste are foundprograms, in Lisa A. Skumatz, and for the “Garbage combination by the ofPound: all thr Frable Skumatz Weight and is et recorded Berkshire, al., Illegal because Pay-As-You-Waste Dumping: compaction Incidence, . can Drivers, affect set-outs and Strategies and, therefore, ; and Skumatz, computed Variable rates Rates as well. for Municipal Solid programs, The Potential areofalso Weight-based estimated at Rates,” less than Resource one year. Recycling These, (July, programs 1991); also and move Skumatz, communities Van Dusen, a long and way Carton, toward 50 percent of their recycling goals. NoteA. Lisa that Skumatz decreases and in John set-outs Green, don’t “Reaching directlyfor reflect Recycling the changes in Multi-family in costs Housing,” for the system. Resource ThisRecycling is a complicating (Octoberfactor

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Trusted by over 1 million members

Try Scribd FREE for 30 days to access over 125 million titles without ads or interruptions! Start Free Trial Cancel Anytime.

Trusted by over 1 million members

Try Scribd FREE for 30 days to access over 125 million titles without ads or interruptions! Start Free Trial Cancel Anytime.

Trusted by over 1 million members

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Trusted by over 1 million members

Try Scribd FREE for 30 days to access over 125 million titles without ads or interruptions! Start Free Trial Cancel Anytime.

Trusted by over 1 million members

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