Toronto Environmental Alliance

Look Before You Leap

The Key Findings

The staff proposal approved at Toronto’s Public Works and Infrastructure Committee meeting on April 26th included an annual budget of $1 million dollars for contract administration, monitoring and enforcement of residential waste collection, or 4.2% of the total contract value. 

Based on independent studies from other jurisdictions, this amount should be around $5 million or 20% of the annual contract cost. Making this change to safeguard Toronto’s services and ensure proper monitoring and enforcement alone would reduce the “potential” savings from privatization from $6 million to $2 million.

TEA did not set out to research whether or not privatization would save money. However, much of the literature we reviewed included information on the costs and savings associated with privatization. Given the prominence the “savings” issue has received in the media and at City Hall, we have decided to share our findings.

There is significant doubt about whether the city will actually save any money by privatizing waste collection. In addition to the costs identified in Finding 4, there are other potential costs that City staff appear not to have factored into their potential savings calculation, in particular the costs to renegotiate the contract if the Province and/or City introduce new waste diversion services.

As noted in Finding 3, there are plenty of examples of contracts that penalize cities for improving waste diversion. There is no evidence the City has included such potential costs in their calculations. This raises further doubt that the numbers presented in the staff report reflect reality.

More generally, studies and research from across Canada and the U.S. have contradicting claims about the potential cost savings from contracting out waste and recycling services. Most reports conclude that savings are dependent on the contract details and level of enforcement. For instance:

• A major study of recycling collection efficiency across Canada concluded: “One of the most significant findings is the lack of a relationship between private-sector companies collecting recyclables and the overall efficiency of collection operations.”²⁰ The same study noted that “In Ontario and the Prairies, private producers are considerably more costly than public producers.” ²¹

• The City of Toronto staff report in 2003 noted that the private contractor waste collection costs tend to increase at a rate faster than public costs. Between 2000 and 2002, private sector costs increased by 26.3%, while public costs increased by only 13.8%, even when wages increased by 6.2%.²²

In sum, these findings raise serious doubt about the claim that privatization will save taxpayers money. The best way to answer the question about what impact privatization will have financially is by developing a baseline analysis of current costs and comparing it to a detailed analysis of potential costs associated with privatization. For proponents of privatization, this “apples to apples” comparison is necessary to put to rest the emerging doubt that privatization will actually save money.

Next: Conclusions & Recommendations