City's Garbage Collection System is Failing

Citizens of Bethlehem are getting ripped off.

The city's market for waste management is hopelessly broken, with residents paying higher prices for worse service and less accountability than their neighbors enjoy in the Lehigh Valley's other cities. 

Last October, the firm Waste Management talked to Matt Assad of The Morning Call about their different price plans for Bethlehem and Allentown.

Allentown residents pay $28 a month for unlimited trash removal twice a week. This includes free recycling, free yard waste removal, and free removal of large appliances.

Bethlehem residents pay $26.50 a month to dispose of 5 bags once a week. There's a $3 charge for each additional bag. This does not include recycling or yard waste, and there is a $20 charge for large appliances. The city charges $40 a year for recycling.

Let's compare the costs for a Bethlehem resident and an Allentown resident who each throw away 7 bags of trash a week. Suppose each person also recycles and throws away 3 large items all year: a broken television, a chair, and a Christmas tree.

If the Bethlehem resident could hold his trash output down to 5 bags a week, his bill would only be $26.50 a month, but since he uses 7 bags, it adds up to $50.50 - almost double the sticker price!

Add in $40 for the city's recycling fee, and $60 for the 3 large items, and the Bethlehem resident's yearly bill comes to $705.96.

The Allentown resident pays just $336 a year, and even gets her garbage picked up twice a week. The Bethlehem resident pays more than twice as much.

How is Allentown able to spend so much less? Anyone who's been to Costco knows the answer: buying in bulk. When you shop at Costco you are benefitting from an economy of scale - it costs less per unit when you buy in bulk. As Sam Augustine of J.P. Mascaro told Matt Assad:

"When you are only picking up trash from two or three homes on a given street, there's just no economy of scale. As a result, we'd have to charge people in Bethlehem $60 to $100 more per year for service that's not even as good," said Sam Augustine, [J.P.] Mascaro's director of sales. "Bethlehem does so many things right, but I'm always amazed that its trash collection [system] is such a joke."

The average cost of picking up each marginal trash bag drops as you pick up more trash bags.

This is why every other city pays less and contracts with a single hauler. The city is able to get a good deal for residents because they can put the contract out to bid and hire the company who is willing to offer the best services at the lowest cost.

Not only is Bethlehem's system too expensive, it also makes the city dirtier. Trash is out on the street in every neighborhood, every single day of the week, and so are the garbage trucks. Because it's hard to prove that someone doesn't have a garbage hauler, it's easy for some people to free ride and dump their household trash on a neighbor's curb, in city and school garbage cans, in businesses' dumpsters, or at illegal dumping sites on Central Boulevard, Williams Street, Eliot Avenue, Railroad and Amplex Streets.

Joe Kelly confirmed to me that the city had 1279 health complaints last year related to ordinance 1161 - the accumulation of trash and the failure to have hired a hauler. City housing inspectors dealt with 1800 housing complaints and estimated about 500 of them concerned the accumulation of garbage.

So we know that this system is way more expensive, and makes the city dirtier than it should be. There is a strong incentive to free ride because of how hard it is to hold people accountable for freeloading. Are there any advantages?

I would argue that there are not. Because the economy of scale applies to garbage collection, a regulated monopoly is going to perform the service more efficiently and at a lower cost than a competitive market with lots of small firms.

Normally you want choice and competition in a market because it produces cheaper prices, better service, and can organize a more efficient system than a centrally planned effort. Not a single one of those benefits is observable in Bethlehem's market for waste management.

On the contrary, the effect seems to be to reduce accountability. If the company the city contracted with was doing a bad job and lots of people complained, the city would feel the pressure and could opt to put the contract out to bid.

But with 19 different companies, there's no single place to apply political pressure to get the problems fixed. The thing about an externality like a highly visible (and smellable) trash collection process is that individuals have no power to fix it by "voting with their feet" and switching companies. 

The choice of switching companies provides no practical benefits or market power to residents acting individually. It's when everyone teams up (via the government) to choose a hauler that residents will reap the benefits of hauler competition in the bidding process.

At a time when so many families are already pinching pennies, I bet most people would probably like to spend less money on their garbage bill and more money on just about anything else. If this system made the city cleaner or offered residents meaningful market power as consumers, this might be a more difficult decision, but it isn't. The current system doesn't benefit anyone but the trash haulers.

Previous efforts to move to a single hauler system have failed because city council caved in to the loudest voices instead of securing the best possible deal for residents. Perhaps unsurprisingly, Republican city council candidates are defending the status quo with lots of Freedom Talk about the free market, but I wonder how they can explain Bethlehem's conspicuously high garbage prices if the unregulated market supposedly controls costs so well. The Republicans seem to prefer a wild garbage market for political reasons, not because there's any evidence that it works better or is saving people money.

Over the next few months we will see the Republican candidates, the trash haulers and YIMFY(Yes In My Front Yard?) activists organizing to preserve the status quo for political and emotional reasons. City council members should keep in mind when considering their vote that the majority of the people they serve are unlikely to view garbage collection as an ideological battle and probably just want their trash to go away as cheaply and discreetly as possible.