vvEPA
United States
Environmental Protection
Agency
Solid Waste "nd.
Emergency Response
(OS-305)
EPA/530-SW-90-0
September 1990
Charging Households
for Waste Collection and
Disposal:
The Effects of
Weight- or Volume-Based
Pricing on Solid Waste
Management
Printed on recycled paper.
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The Effects of Weight- or
Volume-Based Pricing on
Solid Waste Management
Final Report
Prepared for
U.S. Environmental Protection Agency
401 M St. S.W.
Washington, DC 20460
U.S. Environmental Protects Agency
Region 5, Library (PL~r
77 West Jackson BouL . ..-
Chicago, IL 60604-351-.,
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CONTENTS
Section Page
1 Introduction and Summary 1-1
1.1 Background 1-1
1.2 Puipose 1-1
1.3 Method 1-2
1.4 Results 1-2
2 The Role of Unit Pricing in Municipal Solid Waste
Generation and Disposal 2-1
2.1 Rationale for Unit Pricing 2-2
2.1.1 Equity in Financing 2-2
2.1.2 Resource Conservation 2-2
2.1.3 Reductions in Cost 2-3
2.1.4 Health and Aesthetic Appeal 24
2.1.5 Improved Management Information 2-5
2.2 Current Structure of Unit Pricing Programs 2-5
2.2.1 Unit Pricing Features 2-5
2.2.2 Complementary Programs 2-6
3 Assessment Framework 3-1
3.1 Household Decision Making 3-1
3.1.1 Household Options 3-1
3.1.2 Analysis of Household Decisions 3-4
3.2 Community Waste Management Decision Making 3-11
3.2.1 Waste Managers' Choices 3-11
3.2.2 Analysis of Waste Managers' Choices 3-13
3.3 Social Waste Management Decision Making 3-16
3.4 Measures of Effectiveness 3-16
3.4.1 Waste Hows 3-16
3.4.2 Cost of Waste Management 3-20
3.4.3 Financing Waste Management 3-20
3.4.4 Community Health Aesthetics 3-21
111
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CONTENTS (continued)
Section Page
4 Selection of Case Study Communities 4-1
4.1 Selection Criteria 4-1
4.1.1 Mandatory Unit Pricing Program 4-1
4.1.2 Available Data 4-3
4.1.3 Recycling Program 4-3
4.1.4 Community and Program Variations 4-4
4.2 Selected Communities 4-4
4.2.1 Borough of Perkasie, Pennsylvania 4-4
4.2.2 Village of Hion, New York 4-18
4.2.3 City of Seattle, Washington 4-26
5 Conclusions and Issues 5-1
5.1 Introduction 5-1
5.2 Evidence of Effects from the Case Studies 5-1
5.2.1 Effects on Waste Generation, Collection, and Recycling 5-1
5.2.2 Diversion of Solid Waste 5-3
5.2.3 Elasticities 5-4
5.2.4 Costs and Revenues 5-4
5.2.5 Community Acceptance 5-5
5.2.6 Health and Aesthetics 5-5
5.3 Unresolved Issues Related to Unit Pricing 5-6
5.3.1 Issues of Stability 5-6
5.3.2 Issues of Design 5-6
5.3.3 Issues of Purpose 5-8
5.3.4 Other Issues 5-10
Appendix: A Review of Literature on the Economics of Municipal Solid Waste Management
References
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TABLES
Number Page
2-1 Unit Pricing Programs 2-7
2-2 Complementary Waste Management Programs 2-9
4-1 Perkasie Solid Waste and Recyclable Flow Data 4-9
4-2 Perkasie Solid Waste and Recyclable Flow Data for 1988 After
Adjustments for Waste Diversion 4-10
4-3 Perkasie Waste Streams Including Diversion 4-11
4-4 Perkasie Waste Streams with Diversion Allocated to
Conventional Disposal or Recycling 4-12
4-5 Perkasie Annual Waste Flow Changes per Dollar Price Increase 4-12
4-6 Changes in Perkasie's Annual Waste Per Resident 4-14
4-7 Perkasie Financial Analysis 4-15
4-8 Ilion Solid Waste and Recyclable Flow Data 4-22
4-9 Ilion Solid Waste and Recyclable Flow Data Adjusted to Reflect
Unit Pricing Only 4-23
4-10 Ilion Solid Waste and Recyclable Flows Adjusted for Possible
Diversion and Customer Attrition 4-23
4-11 Ilion Annual Waste Flow Changes per Dollar Price Increase 4-24
4-12 Ilion Waste Generation Per Resident 4-25
4-13 Seattle Monthly Residential Incremental Rates 4-29
4-14 Seattle Incremental Unit Rates 4-30
4-15 Seattle Solid Waste and Recyclable Flow Data 4-31
4-16 Seattle Waste Flow Changes Per Dollar Price Increase 4-31
4-17 Seattle Waste Generation Per Household 4-32
4-18 Additional Measures of Seattle Waste Behavior 4-33
4-19 Seattle Average Single-Family Monthly Garbage Bill 4-36
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FIGURES
Number Page
3-1 Household Solid Waste Flows 3-2
3-2 Household Waste Generation Associated with Good X 3-5
3-3 Household Conventional Disposal 3-8
3-4 Household Recycling 3-10
3-5 Waste Management System Solid Waste Flows 3-12
3-6 Total Cost of Community Waste Disposal as a Function of the
Unit Price of Conventional Waste Disposal 3-15
4-1 A Household's Total Cost for Solid Waste Disposal Under Fixed
Fee and Unit Pricing Programs 4-2
VI
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ACKNOWLEDGMENTS
Special thanks go to members of the three case-study communities: Linda
Good of Perkasie, Pennsylvania; Lisa Skumatz and Jennifer Bagby of Seattle,
Washington; and Gale Hatch of Dion, New York. The support and direction
provided by Terry Dinan in her role as EPA Project Officer for this project
should also be acknowledged.
vn
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Chapter 1
Introduction and Summary
1.1 Background
Most United States households pay for solid waste collection and disposal services directly
through a fixed monthly service charge or indirectly through their property taxes.
Increasingly, however, communities are turning to unit pricing as a means of financing solid
waste collection and disposal. Unit pricing means charging households for waste services
based on the amount and type of waste collected: Households that use more of the service pay
more for waste collection and disposal.
The unit price can be assessed based on weight, volume, or some combination of weight and
volume. For example, some communities charge for collection and disposal by the trash bag
with a limit on the bag's weight. Therefore, weight-based and volume-based pricing are
simply special examples of unit pricing.
1.2 Purpose
The core idea embodied in unit pricing is that when waste generators have to pay for waste
collection and disposal in proportion (or equal) to the marginal cost of those services, they will
reduce their use of those services to more efficient levels. This pricing method has proven a
powerful incentive to conserve in numerous other settings. The purpose of this study is to
examine:
the effect of unit pricing on the waste generation and disposal behavior of
households,
the effect of unit pricing on the costs of managing solid waste, and
the role of particular features of unit pricing and other complementary
programs (e.g., recycling) in promoting or mitigating the different effects of
unit pricing.
1-1
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1.3 Method
The case study method was employed in this project First, the trade and professional
literature was reviewed and trade organizations and solid waste experts were interviewed to
identify communities that currently had some form of unit pricing system. Seventeen
communities were contacted and descriptions of these programs and the communities' solid
waste management activities were obtained. Relevant reports on each community's solid waste
management practices and data on waste flows and solid waste management costs were also
evaluated.
Both trade and academic literature related to unit pricing of solid waste were reviewed and
analyses were initiated to identify the likely effects of unit pricing. The reviews and analyses
were used to help sketch the issues of concern and the potential responses of relevant decision
makers to unit pricing-particularly households and waste managers. This, in turn, helped
identify the measures of effectiveness that would be most appropriate to the study: price
changes, changes in the size and composition of waste flows, and changes in the costs of
waste management.
Three communities were selected for detailed case studies based on characteristics of their
program, characteristics of the community, and availability of data. They are: Perkasie,
Pennsylvania; nion, New York; and Seattle, Washington. Further data were requested from
these communities and analyses of the community waste management systems and associated
data were reviewed by officials in those communities.
1.4 Results
For Perkasie and Dion, the two small communities in suburban and semi-rural settings,
respectively, evidence indicates that households
reduced the amount of total waste generated by 10 percent or more,
reduced the amount of conventional mixed waste service by 30 percent or
more, and
more than doubled the amount of waste recycled.
1-2
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These changes should probably be attributed to the unit pricing program in combination with
the availability of curbside recycling and a conventional waste service frequency of once a
week. As illustrated by the nion case, unit pricing does appear to make an important marginal
contribution when added to the other programs.
No evidence was found to indicate that unit pricing increased the level of littering in Perkasie
or Dion or that sharp increases in unit prices increased littering in Seattle, although households
in Perkasie increased backyard burning and disposal of trash in private containers, both inside
and outside the service area. These problems in Perkasie were apparently remedied by passage
of new statutes and better enforcement of existing ones.
In Perkasie and Ilion it was also found that unit pricing reduced the total cost of waste
management by 10 percent or more, with the cost reductions being shared with most
households through reduced fees or property taxes.
In Seattle sharp increases in the unit price over two periods had much less dramatic effects on
waste flows. Households
reduced the level of service they subscribed to (the number of barrels they
were allowed to put out each week),
increased their compaction of trash in their remaining barrels,
slightly increased recycling, and
first slightly increased then slightly decreased the amount of conventional
trash that had to be collected.
The response in Seattle can be attributed to a number of factors including (1) the initial low
price levels and subscription design of the Seattle program, (2) the more urban/multifamily
dwelling setting, and (3) the absence of a curbside recycling program.
However, these results, as interesting and suggestive as they might be, are based on only three
sites and very coarse data. To provide a more complete perspective, other evidence and basic
theoretical insights on prospective effects of unit pricing programs accompanies the case study
results in the remainder of this report.
1-3
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Chapter 2
The Role of Unit Pricing in
Municipal Solid Waste Generation and Disposal
Unit pricing is the practice of charging waste generators for collection and disposal services based
on the weight or volume of their waste. Some communities have had unit pricing or near
approximations of unit pricing for 20 or more years. These communities, however, are exceptions;
virtually all residential solid waste and much commercial and industrial municipal solid waste
collection in the U.S. has been financed through periodic fixed fees or indirectly through general
taxes.
In the mid-1970's widespread concern regarding the health and environmental impacts of open
refuse dumps stimulated some additional interest in unit pricing as a way of influencing the level
and mix of solid waste generation. This interest subsided with the advent of the sanitary landfill.
Evidence has accumulated, however, suggesting that sanitary landfills still pose environmental and
health risks, especially via water pollution and air emissions (EPA, 1989a, 1989b). Similarly,
today's municipal waste combustors (MWCs), while much "cleaner" than earlier generations of
MWCs, still emit some pollutants into the atmosphere and require disposal of ash residue (EPA,
1989c).
To help protect against these problems with conventional waste disposal options, state and federal
governments developed additional and more stringent regulations and guidelines for solid waste
disposal. These initiatives include additional requirements and increasingly stringent restrictions
on planning, siting, design, construction, monitoring, and operation of both existing and new
landfills and MWCs. These initiatives have also contributed to a parallel increase in the cost of
building and operating conventional waste disposal facilities.
With the advent of more stringent solid waste regulations and higher solid waste management
costs at a time when many landfills are reaching the end of their useful lives, waste managers have
a renewed interest in finding alternative ways to finance solid waste collection and disposal and
possibly reduce costs by reducing the flow of solid wastes to conventional waste disposal facilities.
Unit pricing of solid waste collection may mitigate the rise in costs and provide additional
2-1
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revenues as it provides waste generators with incentives to reduce waste generation and use
alternative means of disposal. The prospect for such favorable outcomes, as well as the existence
and extent of possibly undesirable side effects, motivates this study.
2.1 Rationale for Unit Pricing
As the discussion of the recent history of unit pricing suggests, there are several, interrelated
reasons why a community waste manager or some households in a community might want to
establish a unit pricing program. In this section some of the reasons cited by community
representatives for adopting a unit pricing program are discussed. Some of the possible problems
of a unit pricing program are also noted.
2.1.1 Equity in Financing
Unit pricing conforms to the equity principle that one should pay the full costs of the services
used. In other words, those that generate more waste pay more for the additional service. This
notion of equity has been prominent in local finance in recent years as community leaders, fearful
of the political consequences of raising general taxes, adopt "user fees" to finance community
services.
Of course there are methods to achieve other types of equity objectives within the framework of
unit pricing. One method is efficient pricing: unit pricing with price set at marginal cost. Unit
pricing is a necessary condition for economic efficiency, but not all unit pricing programs are
economically efficient. Indeed, other notions of equity can also be incorporated into unit pricing.
For example, unit pricing programs may set special prices based on considerations other than
marginal cost, such as a customer's income or the type of waste collected.
2.1.2 Resource Conservation
A fundamental "materials balance" identity describes the flow of all solid waste:
X, = Xc + X, + Xd
2-2
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where
Xg = amount of waste generated,
Xc = amount of waste disposed, requiring collection,
X, = amount of waste recycled, and
Xd = amount of waste diverted to litter, backyard burning or compacting, or
otherwise discarded by the household.
Resources are conserved by lowering Xg (i.e., less waste-intensive consumption) and by increasing
X,. Since unit prices raise the relative price of X,., they will tend to reduce Xg (waste-intensive
consumption is more costly) and increase X, (the relative cost of recycling is lower). Xd may also
be increased (since its relative cost may be lower, too).
2.1.3 Reductions in Cost
Waste Management Perspective
Many community waste managers are particularly interested in unit pricing as a means of reducing
the cost of solid waste collection and disposal. Perception of a unit pricing program in terms of
cost savings derives from
lower rates of waste generation leading to reduced collection and disposal costs,
additional revenues from the sale of higher levels of recycling, and
cost savings due to the lower amounts of waste being disposed of conventionally.
While these features may reduce some costs of solid waste management, unit pricing may also
impose some additional costs on the system. These additional costs derive from
new materials and equipment requirements,
transactions costs associated with monitoring quantities of waste collected from
each account,
enforcement costs of the unit pricing program and related restrictions,
program administration costs, and
increased litter collection.
2-3
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It is impossible to generalize the net effect of these influences on the total cost of waste service.
The magnitude and sign will vary with the structure of the program and the features of the
community.
Household Perspective
As one might imagine, unit pricing is particularly popular with smaller and lower income
households in communities where it replaces a system that charged a fixed fee per unit time.
Because these households produce less solid waste, their monetary outlay for waste collection and
disposal should decline under the unit pricing program. In communities where the unit pricing
system replaces a levy on property as the means of financing solid waste collection and disposal,
those who own relatively valuable property and generate relatively little waste find unit pricing
especially attractive.
Another dimension of unit pricing program costs that will not show up directly "on the books" of
the community waste manager are the additional costs that are borne as "home production" costs
of the program by households and others. In particular, households may find it efficient to forfeit
leisure or work time to increase "waste processing" efforts, such as recycling some items or
returning refillable containers.
2.1.4 Health and Aesthetic Appeal
Unit pricing may also improve the aesthetics and health of a community. Because such programs
encourage waste reduction and restrict the size and type of waste receptacles, they are sometimes
marketed and adopted as "clean" programs. For example, flies cannot breed if solid waste is in an
airtight container. The "bag program" variant of unit pricing improves neighborhood attractiveness
by requiring closed bags at the curb rather than using open receptacles, which often are left at the
curb for the remainder of the day or longer.
To balance this view, however, one should recognize that unit pricing may also result in unhealthy
or unaesthetic side effects. For example, generators may litter or bum solid waste, causing adverse
aesthetic effects and, possibly, adverse health effects.
2-4
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2.1.5 Improved Management Information
While unit pricing may prove cost-effective in its own right, there is another reason why unit
pricing may be valuable to the community. By virtue of its need to account for the level of use of
waste management services at the household level, unit pricing provides additional information on
waste flows. This information can be used to redesign or refine waste management programs
generally. Thus, the information generated may ultimately lead to further improvements in waste
management, including possible additional cost savings.
2.2 Current Structure of Unit Pricing Programs
2.2.1 Unit Pricing Features
Unit pricing programs can be structured to meet the special conditions of the communities they
serve. As a result, many forms of unit pricing for solid waste services exist throughout the. United
States. Initially examined were 17 such communities from literature review and trade association
contacts. These programs varied greatly in management, fee structures, services offered, and, most
importantly, the kinds of complementary programs offered along with conventional waste disposal.
Table 2-1 summarizes the characteristics of 16 of these communities and their waste management
programs. (The community program omitted is too new to offer sufficient information for this
study.)
Management of the unit pricing programs generally reflected the variety of organizational
structures found in solid waste management. The programs could be
operated as a branch of the municipal government,
designed and managed by a private collection firm, or
designed, operated, and monitored by some mix of public and private entities.
All the programs examined have one feature in common: pricing based on volume. Residents use
waste containers that meet certain volume specifications. Even so, service providers generally
estimate weights per unit volume when setting prices (disposal fees are often based on weight),
and 11 of the communities had weight limits. Enforcing such weight limits is costly, however.
2-5
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and few communities provide sufficient enforcement resources or penalties to see that these limits
are actually observed.
Most programs require the waste customers to use bags purchased from the service provider; other
programs use cans or carts; still others allow consumers to use their own containers, subject to
certain specifications. One community marks cans with a sticker purchased from the waste
service. Some programs offer service to multi-family and commercial entities while others do not.
Fee structures vary widely. Some programs have only per-unit fees, while others have per-unit
fees that supplement flat fees that are either billed directly or included in taxes. Finally, levels of
service, frequency of collection, placement of waste for collection, and requirements for special
services such as bulky waste pickup vary widely.
2.2.2 Complementary Programs
In addition to unit pricing of conventional waste collection and disposal, most of the 16
communities offer other collection and/or disposal programs, including recycling programs and
composting and chipping programs for yardwaste. Table 2-2 summarizes the features of waste
collection and disposal programs that operate in conjunction with unit pricing in these
communities.
The recycling programs vary, but they generally handle
newsprint,
glass, and
aluminum items.
Other items included in certain communities are
plastics,
tin,
corrugated cardboard, and
paper other than newsprint.
2-6
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TABLE 2-1. UNIT PRICING PROGRAMS
(Yes/No) Availability
Community (population)
Carlisle. PA (19.000)
Duluthe.GA (10.000)
Grand Rapids, MI (170.000)
High Bridge. NJ (4.000)
Holland, MI (30.000)
Ilion. NY (9,500)
Jefferson City. MO (36.000)
Lansing. MI (125.000)
LaTrobe. PA (12,000)
Newport. NY (2,000)
Olympia,WA (10,400)
Perkasie. PA (6,500)
Plantation. FL (64.000)
Seattle. WA (500,000)
Wilkes-Barre. PA (50.000)
Woodstock. IL (12.000)
Date unit pricing Mandatory If optional, All
program began or optional percent Areas
participation
> 5 years ago
Early 70's
1973
1988
1981
June 1. 1988
> 22 years ago
1975
-10 years ago
Couple years ago
1954 or earlier
January 1988
15-16 years ago
1981 (revised fee
structure)
1988
1988
0
M
O
M
O
M
O
O
M
M
M
M
M
M
O
M
not available Y
Y
not available Y
Y
10-15% Y
Y
>90% Y
60-70% (by Y
resident bldgs.)
Y
Y
Y
Y
N
Y
Y
Y
Single
Family
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Multi-
Unit
Y
N
Y
Y
if <5 units
N
Y
N
Y
if <5 units
N
N
Y
Y
Y
Y
limited to
few units
Y
4-20unils
N
if >2 units
Com-
mercial
N
N
N
N
N
Y
optional
N
N
N
N
Y
Y
Y
N
N
N
Municipal or Non-Munkloal
Collec-
tion*
N/M
N/M
M
M
N
M
N/M
M
M
N
M
M
N/M
N/M
M
N/M
Dispo-
sal**
N
N
M
N
N
N
N
N
N
N
M
N
N
N
N
N
Mgmt Fees and
Containers
M
M
M,N M.N
M
M
N
M
N
M
M
N
M
M
N
M
M
N
M
M
N
M
N
M
M
N
M
M
N
M
M
N
CONTINUED
* M means city employees collect waste. N/M means city contracts private hauler. N means residents contract private hauler.
** N means disposal at a site or facility that is private or owned and operated by another local government entity; e.g.. a county landfill.
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TABLE 2-1. UNIT PRICING PROGRAMS (CONTINUED)
CostM989) Collection
Community
Carlisle. PA
Duluilie, GA
Grand Rapids, MI
High Bridge. NJ
Holland. MI
Ilion. NY
K> Jefferson City. MO
00 Lansing. MI
LaTrobe. PA
Newport. NY
Olympia, WA
Perkasie, PA
Plantation. FL
Seattle, WA
Wilkes Barre, PA
Woodstock. IL
Containers
Program bags
Program bags
Program bags,
own cans w/ tags
Suckers for own
bags or cans
Program bags,
program carts
Program bags
Program bags
Program bags
Program bags
Program bags
Own cans; bags
cost extra
Program bags
Program bags
Wheeled toters
Program bags
Program bags
Volume or
Weight
Limited
V
V
V.W
V
V
V.W
V
V.W
V.W
V.W
V.W
V.W
V.W
V.W
V
V.W
Minimum Per Container Times/week
$1.10/ 30 gal. 1
$0.60 715 gal.
In taxes $8.50/20 bags 1
1.1 mill tax $0.45 /bag 1
$0.35 /tag
$35/qtr gets 52 $1.65 each 1
stickers/year additional sticker
$1.30 /bag or 1
$8-10 /mo. /can
$1.50/30 gal 1
$1.20/16 gal
$1.30 /bag 2
$7.50/10 bags 1
$51/6mos. $0.25 /bag 1
$1.50/32 gal 1
$1.10/28 gal
$0.80/20 gal
Yes Variety of services 1
$0.80/20lb. 1
$1.50 /40Ib.
$16 7 20 bags 2
At least $10.70 $13.75/30 gal can 1
for mini -can $9.00 7 ea. add'l can
$9.30/8. 30-gal bags 1
$5.55/8. 16-gal bags
$1.22 7 bag 1
Curbside or
Backdoor
C
C
C
C
C
C
C
C
C
C
C
C
C
C.B
C
C
Disposal
Landfill,
Incinerator,
Transfer Station
L
L
L
T.L
L
L
T.L
L
T.L
L
L
T.L
L
T.L
T.L
L
Data Available
N
N
Limiied
Y
Limited
Y
N
N
Limiied
N
Limited
Y
N
Y
N
Y
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TABLE 2-2. COMPLEMENTARY WASTE MANAGEMENT PROGRAMS
10
Recycling
Community
Carlisle. PA
Duluthe. GA
Grand Rapids. MI
High Bridge. NJ
tl_l|._.J kit
no llano, ivu
Ilion, NY
Jefferson City. MO
Lansing. MI
LaTrobe, PA
Newport, NY
Olympia, WA
Perkasie, PA
Planiaiion, FL
Seattle, WA
Wilkes-Barre, PA
Woodstock, IL
* G = Glass
N = Newsprint
M = Mixed paper
Voluntary/
Mandatory
V
No program
V
M
v
V before 6/89
M after
V
V
V
V
V
M
V
V
M
V
C =
F =
A =
Operator
Private
—
Private
City
Private
Ciry
Private
Ciry
Civic Groups
Private
City
City
Civic Groups
Private, city
contracted
Ciry
Private
Container
N/A*
—
N/A
Residents
provide reusable
container
Clear bag
Residents
provide
containers
N/A
N/A
N/A
Clear bag
Recycle cart
furnished by city
Bucket provided
by city
N/A
Carts provided
by contractors
Residents
provide
containers
Bucket provided
by city
Corrugated Cardboard
Ferrous Cans
Aluminum
Additional Cost to
Residents
0
—
0
0
$0.50 per bag
0
0
0
0
1 incl. w/ 6 regular
bags; ea. add'l 50?
0
0
0
0
0
0
** B =
A =
S =
Drop-off or
Curbslde
D
—
D
C.D
C,D
C,D
D
D
D
C.D
C.D
C,D
D
C.D
C.D
C.D
Before
After
Simultaneous
Materials
Collected*
G.H.C.A
—
G,N.M.F,A.P
G.N.M.C.A
G.N.M.F.A.P
G.N.C.F
G.N.C.F.A
G,N,F,A.P
G.N.A
G.N.A
G.N.M.F.A
G.N.M.C.A
A
G.N.M.II.C.
F.A
N.A
G.N.F.A
Complementary
Program Start In
Relation to Unit
Pricing**
A
—
A
Voluntary - B
Mandatory - S
A
Voluntary - B
A
A
A
S
A
Volumary-B
Mandatory-S
A
A
Voluntary - B
S
tN/A =
IfCurbside,
How Often
Collected?
N/A
—
N/A
2/mo.
1/rno.
1/wk.
N/A
N/A
N/A
1/wk.
1/wk.
1/wk.
N/A
l/wk(Norlhend)
1/mo (Soulhend)
1/wk.
1/wk.
CONTINUED
Not applicable.
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TABLE 2-2. COMPLEMENTARY WASTE MANAGEMENT PROGRAMS (CONTINUED)
Yardwasle Recycled
Community
Carlisle. PA
Duhithe. GA
Grand Rapids. MI
High Bridge. N)
Holland. MI
llion.NY
Jefferson City, MO
Lansing, MI
LaTrobe, PA
Newport, NY
Olympia. WA
Pokasie, PA
Plantation, FL
Seattle. WA
Wflkes Barre, PA
Woodstock. IL
Voluntary/
Mandatory
V
No program
No program
M
No program
M
No program
No program
M
No program
No program
V (leaves)
No program
M
V
V
Drop-off or
Curbslde
C.D
C.D
C.D
C.D
C
C.D
C.D
D
Complementary
Program Start In
Relation to Unit
Pricing**
A
B
B
A
B
A
B
A
Composting or
Chipping
Composting
Composung and
chipping
Composung
Composung and
chipping
Composting
Composting
Composting
Composung and
How Often
Collected
As needed
2/rr.onlh
I/week
As r.eidetl
As needed
At least 1/mo.
As needed
(OctDec)
N/A
Container Additional Cost
Specified to Residents
No 0
No 0
No 0
Yes Clear bags SO 25/bjg
No 0
No $2/mo
No 0
No 0
-------
The types of containers used for these recycling programs differ. Most communities provide
recycling containers at no charge to residents, while in a few cases recycling participants pay for
them. However, in all cases, the price charged for the recyclables container is less than the price
of non-recyclables waste container. Some recycling programs began with the community's unit
priced solid waste program, while others began either before or after that program. Finally, some
communities that had recycling programs prior to their unit pricing programs have since altered the
quality of the recycling service offered.
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Chapter 3
Assessment Framework
The effectiveness of unit pricing, however measured, depends on its effects on waste management
decision making. This chapter examines solid waste decision making from the perspective of
households,
community solid waste managers, and
• public policy makers.
This examination helps determine what questions to ask about unit pricing and how to interpret the
answers received. It also suggests specific measures of effectiveness to use when evaluating the
unit pricing experience of the case study communities.
For this examination, economic models of waste management behavior were used. Earlier work in
this vein, both empirical and theoretical, is sketched in Appendix A. The approach outlined here
is quite general, specifying only that decision makers are maximizing some objective subject to
resource or other constraints. The objective need not be monetary (e.g., households are assumed
to maximize overall satisfaction or, in the terminology of economics, utility). The constraints need
not be only economic or technical (e.g., decision makers may be constrained by institutional limits,
such as landfill design regulations). The objectives and constraints postulated for decision makers
are based on both conventional economic theory and observations made in Chapter 2 regarding the
purposes and concerns associated with unit pricing.
3.1 Household Decision Making
3.1.1 Household Options
Figure 3-1 depicts the choices a household faces when determining its waste generation and
disposal behavior. These choices determine both the size and the direction of the household's
waste flows. They will be affected by the pricing of waste disposal collection and disposal
services and by household tastes and preferences, institutional constraints, and technical conditions.
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Consumption Goods
ource Reduction
Through Change in
urchases?
Source Reduction
Through Household
Reuse?
Household Consumption—Waste Generated
Sort for
recycling?
Sorting Solid Waste
Disposal of Recyclable Waste
Mixed Waste
Disposal of Unsorted or Non-recyclable Was
Conventional
Waste Disposal or
iversion?
Conventional Disposal
Self-Haul
for
Conventional
Disposal
Commercial
or Public
Receptacle
Figure 3-1. Household Solid Waste Flows
3-2
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In particular, the array of options actually available to a household depend in large part on
opportunities offered by local waste managers.
All households first face decisions affecting the waste they generate when they purchase goods for
household use. Consumption of these goods usually produces solid waste and, since the kind and
quantity of waste generated varies from one good to another, any change in the goods a household
purchases likely changes the waste generated. Consumers trying to reduce the amount of waste
they generate may choose to purchase fewer packaged goods and throw-away items. In addition, a
household may choose to reuse products they purchase—for example, jars—or donate them to
other users—for example, clothes. This behavior is often referred to as source reduction because it
reduces the amount of waste generated. Or if a recycling program is available, consumers may
choose items with more recyclable components or packaging.
Once waste is generated, the household must decide whether and how it will "process" the waste.
One can think of the household as something like a firm, making decisions on what type of waste
to produce and how to produce it. Recycling is clearly one of the production options available to
the household. If something valuable to either the household or to someone else can be recovered
through recycling, then recycling may be an attractive alternative to conventional disposal or other
means of waste "diversion." Decisions on what to recycle and how to recycle it depend on the
recycling options available to the household. These often vary depending on community recycling
programs, the material recycled, and market conditions when recycling takes place.
Households can also process waste by compaction. By decreasing the volume of waste,
compaction may reduce the handling or other costs of waste generation. Compaction may also
become especially attractive to the household in the case of a volume-based unit pricing program.1
'The household also has storage or inventory decisions to make, especially if it chooses to recycle. For example, it must
decide where and how to store sorted recyclables and how much to store before either recycling them or disposing of
them in conventional fashion with mixed waste. Household decisions in this regard depend on recycling options (such
as collection frequency), the amount of storage capacity, and the value of the recycled material.
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Figure 3-1 shows that even when a household chooses to sort out recyclables, it will dispose of
some portion of the remaining household waste stream in other ways. The most common way, of
course, is for the household to use a collection service to pick up the waste (at that point, the
ultimate disposal of the waste is up to the collector) or to self-haul waste to a transfer station,
incinerator, or landfill. The household may also choose other methods of disposal, including some
that may be either illegal or impose costs on others in the community. These other mixed waste
disposal options are referred to as waste "diversion." Forms of waste diversion include household
disposal by sewage, burning, littering, and disposing in commercial or public receptacles. These
disposal methods and recycling are of particular interest because most unit pricing programs
provide an incentive to households to avoid conventional waste collection. In instances where
waste diversion is illegal, the chances of being caught and the penalty associated with conviction
also affect the household's choice of a disposal optioa
3.1.2 Analysis of Household Decisions
In keeping with the underlying economic rationale for unit pricing, it is assumed that households
maximize utility by combining limited time and other household resources with purchased goods
and services (Becker, 1965). A household uses resources to adjust the size and direction of
consumption patterns and waste flows so as to attain the highest possible level of household utility
or satisfaction.
It is important to observe that in this analysis the household "pays" to generate additional solid
waste, even if this payment is not always in the form of an out-of-pocket expense. The payment
takes the form of time and other costs (e.g., unpleasantness, or disutility, of handling trash,
remembering to put it out on certain days, picking it up after bags or containers have been broken
or spilled). In response to such costs of solid waste generation households purchase trash
compactors, assign children to the trash detail, and spend time reminding the children every week
to do that job. In short, holding all other conditions the same, households probably suffer a loss in
utility as they generate more solid waste, even in the absence of a unit pricing program.
It is expected that such costs are factored into household decisions of the sort depicted by the
household waste flow diagram of Figure 3-1. The household's choice of goods affects both the
3-4
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$/Xg
pg
MC°
MB,
Xg/t
Figure 3-2. Household Waste Generation Associated with Good X
3-5
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utility it obtains from consumption and the level and composition of waste it generates. More
consumption yields additional utility in consumption but also more disutility associated with any
jointly produced solid waste. How will the household balance these considerations and select a
level of waste generation?
It can be shown that a utility-maximizing household subject to resource constraints will select that
combination of goods consumption and waste generation that equates the ratios of marginal
benefits to marginal costs across the different choices. This finding is represented in Figure 3-2,
in which the conditions for maximizing utility have been transformed into equivalent expressions
for selecting a utility-maximizing level of the waste generation. The household's selected rate of
waste generation occurs when the marginal benefit (MBg) of additional waste generation (the
benefit of associated increases in consumption) and the marginal costs (MCp of waste generation
(the price of associated consumption goods and the cost of associated solid waste disposal) are
equal. In the diagram in Figure 3-2, this occurs at waste generation rate X°. Put another way, an
additional unit of waste generation beyond X° will add more to the household's costs than to its
benefits, resulting in lower total net benefits.
Effect on Waste Generation
The marginal cost of each additional unit of waste generated increases when a commodity's
pricing structure shifts from a flat fee to unit pricing. This being the case, the marginal cost
schedule shifts up to a level such as MCj in Figure 3-2. The new utility-maximizing level of
household waste generation after the shift will be lower, X^. The household would achieve this
new, lower level by
changing the mix of goods and services toward less waste-intensive items, and
improving the technology of household waste management to reduce the weight or
volume of waste generated (e.g., buying commodities in bulk, or with little packaging.)
Based on this analysis, the household's waste generation is expected to decline with the introduc-
tion of, or increase in, the unit pricing of waste collection and disposal. The magnitude of this
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decline will probably depend on the initial unit price (initial unit price is zero if the program has
just been introduced) and on the size of the unit price increase.2
Effect on Conventional Waste Disposal
If unit pricing increases the relative price of conventional waste service then a utility maximizing
household will reduce its conventional waste disposal. This is illustrated in Figure 3.3. The
marginal benefit function for conventional waste, MBC, is the household demand schedule for
conventional waste disposal. This function is shown as declining with conventional waste disposal
as a reflection of the declining benefits of the consumption that underlies the waste flows. The
household's initial marginal cost schedule, MC°e, reflects the out-of-pocket and other costs of
conventional waste disposal. The initial optimum level of conventional waste disposal is X°. Unit
pricing shifts the marginal cost schedule up to MCj in Figure 3-3 because conventional disposal
of each unit of now costs more. The new, lower level of optimum conventional waste disposal for
the household is now Xj. As in the case of waste generation, conventional waste disposal by
households should decline as the unit price of conventional waste disposal increases. It is also
expected that the reduction will increase with the number and ease of alternative disposal options
(by shifting MBC downward).
The marginal benefit or demand schedule upon which this response is predicated depends on
fixing the household's tastes and preferences, all other prices, incomes, and other technical and
institutional constraints. If these should change coincident with an increase in the unit price, a
different demand schedule (MBj) may apply and the net effect of all changes will determine Xj.
Furthermore, in cases in which there is a transition from a flat fee to unit pricing of solid waste
there is also usually a change in disposable household income as the household no longer has to
pay the flat fee. This complicates even qualitative estimation of effects of a change in the pricing
policy (Taylor, 1975.)
*There are special conditions under which unit pricing may lead to increases in waste generated, increased generation might
occur if 1) alternative, low-cost, waste disposal options were available to the household; 2) the cost of these alternatives
are not affected by unit pricing; and 3) disposal using these alternative disposal options is particularly suited to solid-
waste-intensive commodities. For example, this might happen if, in response to an increase in the unit price of
conventional waste disposal, a household switched from consumption of beverages in plastic containers that are
conventionally collected and disposed to glass containers that are recycled.
3-7
-------
MC;
MC°
Figure 3-3. Household Conventional Disposal
3-8
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Effect on Waste Diversion
Application of unit pricing to only selected types of service (e.g., conventional disposal) encourag-
es the utility-maximizing household to either adopt or intensify use of other disposal options. As
noted above, households often enjoy quite a range of such choices, some of which may even be
illegal. These options include investment in capital equipment that reduces the net cost, either
monetary or personnel, of managing waste. For example, the household may buy a garbage
disposal so it doesn't generate and handle as much "wet" waste.
Increases in the unit price of conventional waste disposal will likely increase the amount of waste
diverted. While the case studies examined as many options for diverting waste as seem appropri-
ate to the community, most attention is directed toward recycling. This is because recycling
programs are
the most widely promoted method for diverting waste from conventional waste
disposal,
part of the waste management system for most of the communities that have unit
pricing of conventional waste, and
generally monitored by the waste manager.
The effect of unit pricing on recycling for a utility-maximizing household is illustrated in Figure
3-4. The initial level of recycling is X°. This is the point at which the marginal benefits of
recycling (MB?), such as marginal revenues from the sale of recycled materials and avoided cost
associated with conventional waste disposal, are equal to the marginal costs to the household of
recycling (MCr).
With higher prices for conventional waste disposal, the avoided costs of conventional waste
disposal attributable to recycling are now greater and the marginal benefit function shifts up to a
level such as MB j in Figure 3-4. With the shift, the new utility maximizing level of household
recycling is Xj.
3-9
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$/xr
P°r
MB'r
MB?
X°r
Xr/t
Figure 3-4. Household Recycling
3-10
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The increase in recycling occurs because households
recycle more of the waste that is currently generated, and
change the composition of purchases so as to raise the fraction of waste that can be
readily recycled.
3.2 Community Waste Management Decision Making
While in some sense we are all waste managers, the particular waste managers referred to here are
the private firms or public entities and officials that direct and provide municipal solid waste
collection services. These waste managers usually initiate and design unit pricing programs.
While they exercise more control than households over terms and conditions associated with waste
collection in general and a unit pricing program in particular, they still choose among a variety of
economic and technical options that affect the magnitude and composition of solid waste flows and
the effectiveness of a unit pricing program.
3.2.1 Waste Managers' Choices
Some of the major choices waste managers face are described in Figure 3-5. Waste managers
must first decide what services to offer their customers and what the terms of each of the service
options will be. Numerous options are available including changes in the collection point,
frequency of collection, and type of material collected. Figure 3-5 focuses on choices involving
unit pricing, conventional disposal, and recycling. If a recycling program is attractive in principle,
the waste manager must decide whether and how to involve the waste generator. The waste
manager must select curbside or drop-off programs (or some combination), the type of materials to
be covered by the program, and the requirements on households to process materials before
collection. The waste manager must also decide what options are available to households for
conventional waste collection: Where will conventional waste be collected? How frequently will
it be collected? What will be collected? These decisions affect the household response to the
community waste management program in general and the unit pricing program in particular.
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Recyclable and Non-recyclable
Waste Generated
Offer
Recycling
Program?
Set Prices,
Service Conditions
for Conventional
Disposal
Set Prices,
Service Conditions
for Recycling
Curbside
Service, Drop-off
Center, Both
Recyclable Waste
Drop-off Collection
Recyclable Waste
Curbside Collection
Recyclables other
than Yard Waste
Further
Separation by
Collection
Personnel?
Non-recyclable
Waste
Recyclable Materials Markets
Figure 3-5. Waste Management System Solid Waste Flows
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The waste manager must then decide how the collected waste is to be processed. Will there be a
recycling facility for mixed waste? Will there be a transfer station? If so, what waste will be
processed there? Where will the community dispose of conventional solid waste and culls from
recycling facilities? All these decisions help determine the ultimate size and disposition of solid
waste streams for the community.
Collecting, processing, and disposing of solid waste is costly, and the waste manager must also
decide how to finance these activities. The primary options available include
indirect financing through general taxes,
a fixed fee per unit of time, or
a unit price based on weight or volume.
Of course, there are many options involving variations and combinations of these three financing
strategies. An important point to remember, however, is that in setting these financing strategies
the waste manager affects the household's incentives and, ultimately, the level and composition of
solid waste collected.
3.2.2 Analysis of Waste Managers' Choices
Since solid waste managers operate within a variety of institutional settings and market organiza-
tions, it is difficult to generalize regarding their objectives or the constraints under which they
operate. This section briefly considers the objective of cost minimization in conjunction with
several common constraints that condition the cost of service ultimately achieved. Inasmuch as the
unit price is a major decision variable available to the waste manager, discussion here focuses on
how selection of a unit price affects costs.
Cost Minimization
The prospect of reduced costs of service attracts many waste managers to unit pricing. Of course,
the manager must obtain these cost reductions while still meeting any overriding conditions on the
extent and quality of service imposed by law or contract. In order to make the choice between
unit pricing and some other financing system, however, the waste manager must first know what
unit pricing program is most cost-effective.
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Because waste flows depend on household response to the unit pricing program, selection of the
unit price offered to households affects costs. As the price of conventional waste disposal
increases, a decline in the quantity of conventional mixed waste offered for disposal and an
increase in the quantity of waste sorted for recycling or other waste diversion can be expected.
Assuming that collection and disposal of either recycled or conventional wastes are increasing-cost
activities, increasing the price of conventional waste disposal would reduce the total cost of
conventional waste service but increase the total cost of recycling. This is illustrated in Figure
3-6, in which the total costs of a hypothetical waste management system first decline when
declines in conventional waste service cost dominate. Then they increase when increases in the
cost of recycling services begin to dominate. Thus, there is probably some unit price that
minimizes the total cost of service from the waste manager's perspective and puts unit pricing on a
"best" basis for comparison with the cost of service under other financing strategies.
Revenues Requirements
The unit price that minimizes cost will not necessarily result in revenues that cover the costs of
associated service. Indeed, within the wide variety of pricing options available in a unit pricing
framework, the waste manager may obtain revenues that either exceed or fall short of the costs of
collection and disposal. The ultimate relationship depends on specific community conditions
including
design of the unit pricing program (e.g., scope and magnitude of unit pricing),
the constraints to which the waste manager is subjected (e.g., level of service require-
ments),
customer response to the unit pricing program, and
the manner in which costs vary with the level of different waste flow (e.g., economies
of scope and scale).
The unit pricing program may have to be designed with a revenue requirement that revenues must
cover costs. Adding this constraint can only raise the total cost of providing service, but the
program that will minimize the extent of this rise depends, again, on community conditions.
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TC
(Total Cost per
Unit of Time)
125 t
100"
75"
0 1 2 3 4 PC
(Price of Conventional Waste
Disposal per Unit of Waste)
Figure 3-6. Total Cost of Community Waste Disposal as a Function of
the Unit Price of Conventional Waste Disposal
3-15
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Recycling Requirements
Anticipated effects of unit pricing include increased waste recycling and diversion. Indeed, a
waste manager may be required to meet a certain recycling goal. This might be achieved by
increasing the differential in the unit price between conventional waste disposal and waste
recycling. As in the case of the revenue requirements constraint, such a recycling requirement can
only raise the costs associated with a unit pricing. The unit pricing program that meets this
constraint at least cost will again depend on conditions in the community.
Economic Efficiency
This objective is inspired by the economic efficiency notion that the user should not only pay in
proportion to the service received, but that the rate they should pay is equal to the marginal costs
incurred to provide another unit of service. In its broadest form, the objective of economic
efficiency suggests that all services provided by the waste manager should be priced—even
recycling, composting, and other diversion activities. The effect of this objective on waste flows
and costs depends on the range of solid waste categories over which unit pricing is applied, the
way in which costs are allocated to these categories, and, as in the cases discussed above, on
household response to these prices.
3.3 Social Waste Management Decision Making
Ordinarily, competitive markets provide a mechanism whereby real resource costs are introduced
as elements into the waste manager's decisions and promote economically efficient decisions. For
example, the cost of a collection truck reflects the real resource cost used in producing the truck
and the productive opportunities foregone when using the truck to provide waste management
services. However, when competition or markets break down, community waste managers'
decisions may not account for all the costs to society. In selecting a unit pricing program to
minimize cost, waste managers with some degree of market power may exclude from consideration
those effects that do not show up as costs on their books but that impose real costs on both those
the program serves and, sometimes, on firms or households outside the service area. For example,
the waste managers' calculations may not reflect the cost of any additional time and inconvenience
that unit pricing imposes on households.
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There are many reasons why social costs (and benefits) of waste management decisions might not
be fully reflected in the costs seen by community waste managers. These range from the public
enterprise nature of waste management in many communities to the existence of technical
environmental "externalities" such as air and water emissions from landfills that impose costs on
third parties. Addressing these problems and their remedies in a comprehensive way is outside the
scope of this report. As noted above, however, unit pricing is a likely element of any plan to
provide household and waste management decision makers with better measures of the social cost
of their decisions. It is also possible to identify some components of the social costs and benefits
not incorporated into community waste management decisions and observe how these costs are
affected by unit pricing programs. For example, one might observe increasing waste flows in
adjoining communities (a likely social cost) or decreasing levels of air pollution (a likely social
benefit) in communities downwind from the MSW combustor.
3.4 Measures of Effectiveness
3.4.1 Waste Flows
As described above, unit pricing influences household decisions and, consequently, household
waste flows. Unfortunately, only aggregate data are available from case study communities,
covering all the households of a service area rather than individual households. For this reason,
the measures of effectiveness adopted are based on aggregate waste flows.
Gross Waste Flows
Based on the preceding analysis, gross waste flows of interest will be waste generated (X,), waste
recycled (X,), waste conventionally disposed (XJ, and waste diverted (Xd). The last term, waste
diverted, refers to waste flows associated with all the self disposal options exclusive of recycling.
These options, many of which were referred to above, may be legal or illegal, benign or costly.
The basic relationship between these flows is given in Equation 3.1.
X, - Xd = X, + X, (3.1)
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The amount of waste generated, less the amount of waste diverted, equals the sum of waste
recycled and waste conventionally disposed (mixed waste). Based on past research and the
analysis of this chapter, it is expected that as the unit price increases, X,. and X, decline and X,
and X,, increase. By examining these flows before and after a change in the unit price, one can
obtain estimates of how, in the aggregate, households have responded to the change.
The case studies present rough measures of the flows on the right-hand side of Equation 3.1 both
before and after a change in unit price. Quantitative measures of waste generated or diverted,
however, are not directly available and estimates of the effect of the unit pricing on their
magnitudes are more speculative.
Changes in Waste Flows
By computing changes in Xe (AXJ and X, (AX,), preliminary estimates can be made of the
absolute changes in waste flows due to unit pricing. One qualification, an important one in each
of the case studies, is that other program changes often occurred coincident with the change in unit
price. Unless one is willing to assume that these other changes had no effect on waste flows, the
AXe and AX, observed are the joint product of unit pricing and coincident changes in other
conditions in service. This problem with joint effects is an inevitable by-product of analysis with
limited data because it is infeasible to use the statistical tools that might distinguish among the
different effects.
By making assumptions about the magnitudes of change in one or the other of the variables on the
left-hand side of Equation 3.1, one can also deduce what changes, conditional on the accuracy of
the assumptions, occurred in the remaining variable based on the net effect on Xc and X,
Average Response to Price Change
While changes in waste flows can be observed in the case study communities over relatively short
intervals, comparison among the communities requires at a minimum some "normalization" to
account for differences in the absolute size of the service area. Therefore average estimates of
changes in flows based on population are computed. While this doesn't address all the underlying
differences in the communities, these average values do provide a raw notion of how the absolute
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magnitudes and changes in waste flows compare. These average values are also useful for
comparison across periods in a single, fast-growing community or service area.
Arc Elasticities
The size of waste flow changes relative to the change in unit price is clearly important to assessing
the effects of unit pricing. The arc elasticity of demand is the measure most often used to assess
the effects of such discrete changes. The arc elasticity is defined in Equation 3.2.
AX
AP
AP
(3.2)
These arc elasticities are computed for the various waste flow changes estimated and are interpret-
ed as the percentage change in the flow due to a percentage change in the price. In instances
where we are dealing with changes in recycling, diversion, or generation, the elasticities are "cross
elasticities" in that the waste flow that has changed is not the waste flow whose price has changed.
For example, a cross elasticity is used to measure the percentage change in recycling brought
about by a percentage change in the price of conventional disposal.
The expectation for the signs of the arc elasticities is based on an expectation for the direction of
change in waste flow quantities.
EX,PC = negative
EX,PC = positive
EX,PC = negative
positive
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3.4.2 Cost of Waste Management
Community Waste Management
The cost-effectiveness of unit pricing from the waste manager's perspective may be measured in
terms of the expenditures needed to satisfy service requirements under the different pricing
conditions. In the case studies, information was examined on both total cost and line item
information to see how the expenditures have changed under unit pricing. This includes consider-
ation of capital expenditures or depreciation, where such data are available, and system credits for
avoided costs or revenues from sale of recyclables.
Attributing cost changes to unit pricing has problems similar to attributing flow changes. While
an attempt was made to try to isolate cost changes associated with the unit pricing program, it is
often difficult to separate them from other, coincident changes in waste management and service.
Household Waste Management
Households alter their waste generation behavior to take advantage of savings offered by unit
pricing. Consequently, from a household's perspective the effectiveness of unit pricing is in part
represented by changes in household costs or waste expenditures. In Chapter 4 calculations are
made for some selected households for what this cost might be. A broader measure of cost to
households, based on nonmonetary costs coincident with unit pricing as well as changes in
out-of-pocket expenses, is beyond the scope of this study.
3.4.3 Financing Waste Management
Monetary costs to the household are also revenues from the perspective of the waste manager.
Revenues generated by unit pricing are reported in the case studies. These revenues are compared
to the costs actually borne by the waste manager to see how they relate to total costs and the costs
of collection and disposal of conventional waste. In other words, the study addresses how closely
the unit pricing conforms to pricing service on an "enterprise" basis or, in pursuit of economic
efficiency, the estimated marginal cost of service.
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3.4.4 Community Health Aesthetics
While quantitative measures do not exist for the health or aesthetic effects of unit pricing,
information on community perceptions was collected for the case studies. These perceptions,
particularly as they relate to questions associated with waste diversions such as littering, backyard
composting, and backyard burning, are included in the discussion of the effects of unit pricing.
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Chapter 4
Selection of Case Study Communities
A literature search was conducted to begin locating communities with unit pricing programs for
solid waste collection and disposal. To obtain additional information, sources, including trade
organizations, identified through the search were contacted. This list of unit pricing communities
grew as some of the first communities contacted were able to identify other areas with such
programs. In all, 17 such communities were identified (see Chapter 2). Initial contacts were made
with each of these communities to get a description of the community and its program for
handling solid waste. During these initial contacts valuable information was obtained regarding
when and why a unit pricing program was adopted,
how the program was operated and managed,
what kind of recycling program, if any, was available to waste disposal customers,
what data were available, and
general comments on the purpose and degree of success of the unit pricing
program in the community.
Summary descriptions of the programs in each of the communities are given in Chapter 2. Based
on the compiled information, communities were evaluated to determine which were most suitable
for case study purposes.
4.1 Selection Criteria
4.1.1 Mandatory Unit Pricing Program
The first criterion used for selecting a community as a case study community was that the
community's unit pricing program be mandatory for residents of the area. Of the 16 unit pricing
programs examined, 12 were mandatory, meaning residential customers either were not offered or
were not allowed to choose alternative waste handling programs provided by the municipality or
private haulers. Studying programs with mandatory participation is essential since information
4-1
-------
Total
Cost
($)
Unit Pricing
"TC Fixed Fee
Q.
Q
Waste Collected
Figure 4-1. A Household's Total Cost for Solid Waste Disposal
Under Fixed Fee and Unit Pricing Programs
4-2
-------
from areas where residents may choose whether or not to use a unit priced service may not reflect
the full effects resulting from these programs. Those likely to subscribe voluntarily will be
persons with previous inclinations to limit the waste they dispose of. When a unit pricing program
is in place, a customer's cost of disposing of an additional unit of waste is the same as for every
other unit disposed of. In contrast, when a flat fee service is available, the cost of disposing of an
additional unit is zero. Figure 4-1 illustrates the total cost curves for these two scenarios. The
quantity of waste marked by the intersection of these two curves is the quantity that determines
which method of payment customers would choose if they made their decision based solely on
out-of-pocket cost. A customer who generated less than Qf would choose the unit pricing
program, and one who produced a quantity to the right of Qt would choose the flat fee system. In
areas where residents are given a choice, those households choosing to participate in the unit
pricing program would be those who already generate less waste. Consequently, the behavior of
waste generators in voluntary unit pricing programs, even when measured at participating
households, does not represent the full potential for changes in behavior under unit pricing.
4.1.2 Available Data
A second criterion used for determining a program's suitability as a case study was the availability
of existing data that could be used to evaluate the program's effectiveness. Contacts at seven of
the programs indicated that such data were available. Some of these seven communities had very
limited or incomplete data at this time, especially those whose programs were less than two years
old.
4.1.3 Recycling Program
Another criterion used for selecting case study communities was whether or not some kind of
recycling program was involved, or at least available. User fee waste collection programs provide
incentives to find alternatives to conventional landfill disposal, such as recycling. Consequently,
the case studies of the effectiveness of unit pricing needed to include a representation of
complementary recycling programs. Nearly all the recycling programs described by the
communities contacted were voluntary, not mandatory, whether they were operated by the
municipalities, private companies, or volunteer organizations. In communities where recycling was
mandatory, some were made so to comply with recycling laws made at the state level. Recycling
was not strictly enforced, however, as the penalty a person paid for not recycling was simply the
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cost of waste disposal that they could have avoided had they recycled. All but 1 of the 17
communities had some kind of recycling program available to its residents, and 9 of these offered
curbside collection.
4.1.4 Community and Program Variations
Finally, programs were selected from those that had met the above standards that offered variations
in community characteristics and the waste programs themselves. Differences in area and
population were looked at, and whether the community was urban, suburban, or rural was
considered. Programs differed in age, fee structure, service features, and how they were operated.
The small final group of programs needed to include both large and small communities with
variations in their waste programs, so that the case studies could provide a broad information base
about unit pricing programs.
4.2 Selected Communities
Based on the criteria discussed above, three communities were selected for case studies. They
include the Borough of Perkasie, Pennsylvania; the Village of Dion, New York; and the City of
Seattle, Washington. These selected communities and their unit pricing programs for solid waste
collection are described below.
4.2.1 Borough of Perkasie, Pennsylvania
Community Profile
The Borough of Perkasie, located in Bucks County, is a small suburban community about 25 miles
north of Philadelphia, Pennsylvania. There have been substantial changes in the community over
the past decade—particularly in the last five years. In 1980 Perkasie had a population of 5,241.
County census data in 1987 reported the population as 6,247, and the borough's planning
department estimates its 1988 population as 6,564. The growth in Perkasie is not attributable to
growth in industry there. Rather, the presence of available older housing and land made Perkasie
attractive for development as a bedroom community. Many residents are employed by businesses
located to the south in Philadelphia or to the north in Allentown or along the Route 309 corridor,
which connects Perkasie to these two cities. The borough's population is generally described as
white, upper middle-class. In the past, the borough had many older residents, but now the
population tends to consist of younger, better educated households, with small children. The
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majority of housing is single-family dwellings. Substantial increases in median housing costs have
been accompanied by less than proportionate increases in salaries. The median sales price of a
house in Perkasie increased 91 percent between 1980 and 1987 to $93,250, while median
household income rose only 66 percent to $30,373 over the same period. Similar disproportionate
changes throughout Bucks County have targeted the housing market primarily towards repeat
buyers with higher than average incomes. Consequently, the economic profile for the population
of Bucks County, including Perkasie, has shifted upwards during the 1980's (Bucks County
Planning Commission, 1989).
Waste Management Program
History
Responding to the sharply rising cost of solid waste disposal, Perkasie began a unit pricing
program January 1, 1988. Perkasie's program is a bag program—residents pay for having their
waste collected and disposed entirely through purchasing the official borough trash bags. Solid
waste must be placed in these bags or it will not be collected.
The borough has always operated a waste collection system, but prior to 1988 residents paid a flat
fee of $120 per year, billed quarterly, for curbside pickup of unlimited amounts of waste,
including bulky items. The borough set this fee by estimating the costs of collecting and
disposing of its solid waste, and then allocating these costs across households and commercial
customers. Fees were set similarly when the unit pricing program was developed, but the borough
needed additional estimates of the number of trash bags a household would use annually and the
quantity of waste per trash bag. Based on these estimates, bags were priced at $1.50 for a 40-lb
size and $0.80 for a 20-lb size. These bags are exempt from state sales tax and are available for
purchase at the Borough Hall and at local stores.
Relative to the previous $120 annual fee, households under the new pricing structure may dispose
of 80 large-sized bags of waste per year for the same price, or just over 1.5 bags per week. A
survey sent to borough residents in August 1988 asked residents to estimate the number of waste
disposal bags they used either weekly or monthly. Of the 3,230 households and commercial
operations surveyed, 42 percent (1,341 households) responded. Of these, nearly one-fourth (325
households) appeared to be spending less than $75.00 annually under the unit pricing program, and
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the average large bag user was spending less than the prior year's $120 fee. An even larger
portion of households benefit financially from unit pricing, if one accounts for the planned
increase in the flat fee for 1988 to $145. Under this scenario, a household in the unit pricing
program could dispose of 96 large bags of waste each year, or 1.8 bags each week, for the same
price as the flat fee.
Service Features
Some features of Perkasie's waste collection service changed with the introduction of the bag
program in 1988. While all dwellings and businesses within the borough's limits are still eligible
to use the borough's waste service, commercial customers and multi-family dwellings with four or
more units may choose instead to contract with private haulers. Other residents must use the
borough's service. Prior to 1988, waste was collected twice each week curbside. Since then,
collection is still curbside, but mixed waste is collected only once per week, recyclable aluminum
and glass collected on a different day once a week, and other recyclables collected once a month.
This change could account for some of the reduction in waste generation, since studies have shown
that decreasing collection from twice per week to once per week can decrease generation by 30
percent or more (see Appendix).
One important change in the waste service is the restrictions now placed on customers disposing of
bulky waste. Prior to the bag program, unlimited quantities of such items would be collected any
regular collection day at no additional cost to the customer. Since 1988, however, bulky waste is
collected only once per month, and only one item, equivalent in volume to a refrigerator, is
permitted per household per month. Beginning in 1989 residents must purchase and attach stickers
costing five dollars each to appliances they wish to have collected.
Complementary Programs
A major change in Perkasie's waste service has been the start of curbside recycling coincident with
the start of the bag program in January 1988. Residents could previously recycle glass and
newsprint through programs operated by volunteer organizations. Glass was collected at drop-off
points twice monthly, and newsprint was collected curbside once monthly. As of January 1988
Perkasie requires residents to recycle and provides them with buckets for their aluminum and glass
items, which are collected once each week. These two items are sorted by the collection
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personnel. Glass is sorted additionally by color. Residents pay no fee for the buckets or
collection, and the only penalty facing those who do not recycle is the price of the bags they must
use to dispose of recyclable items as solid waste. Besides glass and aluminum, the borough
collects bundled newsprint, junk mail, newspaper inserts, and corrugated cardboard. These items
are also collected curbside, but only one time each month. Residents may choose to transport their
recyclables to central drop-off points available 24 hours a day, rather than place them curbside for
collection.
In addition to this recycling program, Perkasie encourages, but does not regulate, composting of
yardwaste. Leaves are collected curbside during two months of the year, with collection days
announced in the local paper. They are taken to a local farmer who composts them for his own
use. This service was provided before the bag program began, so yardwaste was not a part of the
borough's landfilled waste even before 1988.
Effects of Unit Pricing
Impacts on System Waste Flows
Gross Flows. Residents have responded to unit pricing in Perkasie to reduce some quantities in
the waste stream and to diven some flows to alternate disposal options. A Wall Street Journal
article (June 21, 1989) described the change in behavior of one Perkasie household, the Campbells,
that typifies many households in the borough. Residents, since the introduction of unit pricing,
give much more thought to the waste they throw away. They save recyclables to take advantage
of the borough's free recycling program and to diven waste from the conventional disposal stream.
They compost food waste, grass clippings, and leaves in their backyards, which reduces the
quantities of waste collected by the borough. Residents have also reduced the quantities of waste
they generate by changing their buying behavior. The Campbells have reduced the quantities of
some products they buy, such as paper towels; they avoid elaborately packaged products, such as
cosmetics; and they buy beverages in aluminum cans or returnable bottles, not in non-returnable
plastic. As a result of these changes in behavior, the Campbells spent only $116 for waste
services in 1988, compared to the proposed $145 flat fee. For elderly residents unit pricing offers
even greater potential savings. One elderly resident reported his 1988 expenditure for waste
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services was only $14, since he had reduced the quantity of waste he generated to about one bag
each six weeks.
These specific examples describe the effects on unit pricing on certain households, but a broader
analysis required an examination of the borough's waste streams. For this analysis, the study first
examined gross flows for the years before and after the start of unit pricing. Perkasie was able to
provide data for two of the components of the gross flow equation described in Chapter 3 of this
report. The borough reported tonnages for the conventionally disposed waste (landfilled waste)
and for recycled waste. The quantity of waste generated was not available, however, because of
the difficulty of quantifying the amount of waste diverted from the waste stream. These last two
quantities were estimated based on comparisons of 1988 and 1989 data.
Although the data were inadequate to accurately quantify the diverted flow, Perkasie sources
described existing disposal options that contributed to this flow. At least 3.1 percent of the
reduction in municipal waste collected was attributable to the attrition of commercial customers
from the borough's collection system to private haulers. Additionally, the borough reported a
substantial increase in household trash-burning in backyards, fireplaces, and wood stoves. The
borough was forced to enact a burning ban, which became effective March 1989. Other possible
disposal alternatives include backyard composting, illegal dumping, garbage disposal through the
sewage system, and exporting of waste. Perkasie officials indicated there had been no noticeable
problem with littering and no change at the water utility that would indicate an increase in the use
of the sewage system. There have, however, been numerous reports that residents of Perkasie are
taking their waste to commercial dumpsters and outside the borough to neighboring Sellersville.
In fact, the mayor of Sellersville has offered a $25 reward to persons who help catch persons
bringing waste into the Sellersville limits. While a survey sent to Perkasie residents showed a
high level of approval for the bag program, there have been many complaints by businesses and
persons outside the borough.
All the solid waste figures and the 1988 recycling figures were taken from the borough's 1988
report on its per-bag disposal fee, waste reduction, and recycling program. The recycling figures
prior to 1988 came from persons associated with those recycling programs. Walt Wimmer, who is
in charge of glass collection for the civic organization Brothers of the Bush, estimated that prior to
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1988 they collected about 200 tons of glass yearly in the Perkasie area. Of this amount he
estimated that 50 percent came from inside the borough limits. All 1988 figures are for tonnages
collected inside the limits. Tuturice Brothers shredded and sold the paper collected by the
volunteer fire department before 1988. Charles Tuturice estimated that the firemen collected
30,000 pounds per month, or 180 tons per year, on average from 1985 to 1987.
The waste flow changes described in Table 4-1 resulted from all changes that took place in
Perkasie between the 1985-87 time period and 1988 that affected the waste generation and disposal
behavior of the borough's residents. In particular, the changes reflect the effects of the
introduction of unit pricing and curbside recycling. In 1988 the quantity of waste Perkasie
collected for conventional disposal was less than half its previous yearly average, and the quantity
of recyclables collected more than doubled. Of the 1,320 ton decrease in conventionally disposed
waste, increased recycling accounts for 420 tons. This leaves a decrease in total waste collected of
900 tons, which is the result of some combination of a decrease in waste generated and an increase
in waste diverted to other means of disposal.
Table 4-1. Perkasie Solid Waste and Recyclable Flow Data
1985-87
Annual 1988
Average Reported
(tons1) (tons)
1988
Adjusted for
Commercial
Attrition2
(tons)
Change Change
(tons) (%)
Conventional Solid Waste
Collected (includes
bulky waste), X,.
2,520
1,160
1,200
-1,320 -52
Recyclables Collected, X,
Paper
Aluminum
Glass
Total Conventional and
Recycled Waste Collected, X,
280
(180)
(0)
000)
2,800
700 700
(470)
(10)
(220)
1,860 1,900
+420 +150
-900 -32
'All quantities in English tons.
*3.1 percent of the reduction in waste collected is attributable to commercial attrition from the borough's collection system
to private haulers. This increases collected tonnage by 40 tons.
Source: Good, 1988.
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As discussed earlier, backyard burning increased when unit pricing became effective. While the
borough has no measure of how much burning occurred, an estimate can be obtained using 1989
data after the burning ban was enacted. The quantities of paper recycled were compared for the
second and third quarters of 1988 and 1989, since the burning ban took effect in March 1989, and
since paper is likely to be the waste material that was being burned. The quantity of paper
recycled in 1989, relative to 1988, was 32 and 8 percent greater for the second and third quarters,
respectively. Using the average, one can estimate that 20 percent, or 120 tons, of the recyclable
waste paper generated in 1988 was burned.
Some portion of conventionally disposed solid waste was likely also to have been diverted from
the waste stream. In addition to implementing a ban to control burning in 1989, the borough and
neighboring communities increased policing efforts aimed at stopping waste from being diverted
by exporting it or by using privately hauled commercial containers. Assuming these measures
have been effective in eliminating most diversion problems in 1989, one can estimate the quantity
diverted in 1988. Again, 20 percent appears to be the best available estimate of the conventional
waste diverted in 1988, since the quantities of conventionally disposed waste in the first three
quarters of 1989 were, on average, about 20 percent higher than the 1988 quantities. Based on
these estimates, the values given in Table 4-2 approximate waste generated for collection, waste
collected and disposed, and waste diverted in 1988 (adjusted for commercial attrition).
Table 4-2. Perkasie Solid Waste and Recyclable Flow Data for 1988 After Adjustments
for Waste Diversion
Tons
Collected
Tons and Tons
Generated Disposed Diverted
Conventional Waste 1,490 1,200 290
Recyclables: 820 700 120
Paper (590) (470) (120)
Aluminum (10) (10) (0)
Glass (220) (220) (0)
Total Waste 2,310 1,900 410
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The flat fee system used prior to unit pricing did not provide waste generators an incentive to
divert waste from the collection streams, so negligible diversion can be assumed prior to 1988.
Furthermore, assuming the change in waste compacted by households is negligible, waste collected
would roughly equal waste generated.1 Working on those assumptions, the effects of unit pricing
and curbside recycling on Perkasie's waste flows are described in Table 4-3.
Table 4-3. Perkasie Waste Streams Including Diversion
Waste Generated, Xg
Waste Diverted, Xd
Waste Collected and Disposed
(Conventional and Recyclables,
1985-87
Annual
Average
(tons)
2,800
0
2,800
1988
Adjusted for
Commercial
Attrition
(tons)
2,310
410
1,900
Change
(tons)
-490
+410
-900
Change
(%)
-18
-32
Table 4-3 shows a substantial, but much smaller, effect of unit pricing and curbside recycling on
waste generation than on waste collected and disposed. Of the 900 ton decrease in waste collected
and disposed, approximately half resulted from a reduction in waste generated and half from waste
diversion. The 18 percent decrease in waste generated is the result of a combination of altered
purchasing patterns, increased backyard composting, and other behavioral changes that actually
reduced the quantity of waste that must be disposed through channels outside the household.
For the purposes of analysis, assume that if Perkasie's burning ban and policing measures had
been in place in 1988, no waste would have been diverted; rather, the borough would have either
recycled or conventionally disposed of all waste generated. Table 4-4 gives the effects of unit
pricing accompanied by curbside recycling under such a scenario.
'The change in waste diversion due to changes in household composting are difficult to estimate because some yard wastes
(e.g., leaves) are not collected by the municipality.
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Table 4-4. Perkasie Waste Streams with Diversion Allocated to Conventional Disposal or
Recycling
Conventional Solid Waste, X,.
Recyclables, X,
Paper
Aluminum
Glass
Total Waste Generated, Xg
1985-87
Annual
Average
(tons)
2,520
280
(180)
(0)
(100)
2,800
1988
Adjusted for
Commercial
Attrition
(tons)
1,490
820
(590)
(10)
(220)
2,310
Change
(tons)
-1,030
+540
-490
Change
(%)
-41
+193
-18
Average Change Per Dollar. The per unit price, P, of disposing of solid waste was zero before
1988, since residents paid a flat annual fee, not directly related to the quantities they disposed.
With the introduction of unit pricing, however, residents paid a price directly related to the
quantity of waste they disposed, through the purchase of either large or small borough bags. In
1988 large bag sales (86,600 bags) accounted for 84 percent of all bag sales. Assuming these
large bags contained 84 percent of all bagged waste collected (X,. less 120 tons of bulky waste),
each bag held approximately 20 pounds of waste. Therefore, residents paid $1.50 to dispose of 20
pounds of waste, or $150 per ton. The calculations in Table 4-5 are based on these prices and the
information in Table 4-4.
Table 4-5.
Perkasie ANNUAL Waste Flow Changes Per Dollar Price Increase
xc
x,
x.
DX/DP
[ton/($/ton)]
-6.9
+3.6
-3.3
% DX/DP
[(ton/100) / ($/ton)]
-0.27
+1.29
-0.12
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These calculations indicate that placing a per-unit charge on waste services, in combination with
curbside recycling (a relative ready alternative to conventional collection), gave Perkasie residents
an incentive to reduce the total amount of waste they generated.
Arc Elasticity. Arc elasticity calculations based on Table 4-4 relate changes in quantities of waste
to the change in a waste customer's price. These elasticities are:
EXg, Pc = -0.10
EXC,PC = -0.26
EX,, Pc = +0.49
Negative elasticities here represent a decrease in quantity, and positive ones an increase. These
elasticities suggest that a price increase for conventional waste disposal of 10 percent, in
combination with instituting free curbside recycling of paper, aluminum, and glass, will lead to a 1
percent decrease in waste generated, a 2.6 percent decrease in waste disposed conventionally, and
a 4.9 percent increase in material recycled.
Average Flows per Person. Another way to examine the data is to measure waste-per-resident
changes. County records give the population of Perkasie Borough at the beginning of 1987 as
6,247. This is assumed to be the 1985-87 average for the calculations below. Since that count
was taken, the borough's population has grown because of residential developments, not
annexation. Perkasie's population in 1988, as estimated by the borough's planning department,
was 6,564. This figure is used as the 1988 population for the calculations in Table 4-6.
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Table 4-6. Changes in Perkasie's Annual Waste Per Resident
Population
Xg (T/person)
X,. (T/person)
X, (T/person)
Households
Xg (T/HH)
X, (T/HH)
X, (T/HH)
1985-87
Average
6,247
0.45
0.40
0.04
2.4991
1.12
1.01
0.11
1988
6,564
0.35
0.23
0.12
2.6152
0.88
0.57
0.31
Change
+317.00
-0.10
-0.17
+0.08
+116.00
-0.24
-0.44
+0.20
%
Change
+5.1
-22.0
-42.0
+200.0
+4.6
-21.0
-44.0
+182.0
'Calculated from 1985-87 population by using 1988 data to determine persons per household.
'Estimate of dwelling units.
Source: Bucks County Planning Commission, 1989.
Impacts on System Costs and Revenues
Perkasie's 1988 and 1989 reports on this program include financial data, reproduced in Table 4-7.
The data provide information on a cash basis, and do not include any analysis of the tipping fee
costs avoided by reducing the quantity of waste that was landfilled. Neither do they include
capital or administrative expenses. Capital costs are viewed as fixed, and such purchases are made
from an account that is separate from the operating expenses account This is standard practice for
all departments in the borough. Administrative costs are handled similarly. The borough has only
thirty full-time employees, and while administrative expenses were initially heavy in the planning
and startup stages they have been relatively small since the program has been operating.
The waste program in 1988 realized a loss of $6,160.84. The borough, however, only took a loss
of $4,335.95, because in 1988 the borough neither obtained revenue from nor incurred the labor
costs associated with glass recycling. This operation was handled by the Brothers of the Brush in
1988, but in 1989 Perkasie Borough took over.
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Table 4-7. Perkasie Financial Analysis
1988
Revenue
B^l&8&16.50
Bulky waste stickers
Recyclables
Total Revenue
Operating & Maintenance Expenses
Tipping Fees $
(includes bulky waste disposal)
Additional bulky waste disposal
Collection labor
Disposal bags
Glass processing labor
Truck expenses
Fuel
Paper disposal
Miscellaneous/Other
Total O&M Expenses
Income (Loss) from Operations
$ 137,094.80
0.00
27,679.71
$ 183,196.21
74,618.53
2,400.00
54,585.80
23,360.86
14,048.96
6,349.05
2,009.50
0.00
11,984.35
$189,357.05
$(6.160.84)
(Jan.-Sept.)
1989
1,310.00
14,634.87
$ 153,039.67
$ 69,407.97
1,550.00
44,973.35
16,230.88
7,641.00
3,127.85
2,063.45
1,635.30
4,365.85
$150,995
$2,044
.65
.02
MHM
Source: Good, 1988; Good, 1989.
Revenues in 1988 were dramatically lower than in the previous years under the flat fee system. At
$120 for each of the 2,499 households in 1987, revenues were approximately $300,000. Revenues
in 1988 were only 61 percent of this value. Had the flat-fee system stayed in effect in 1989 at the
planned cost of $145 per household, 1988 revenues would have been nearly $380,000.
Although on a strictly cash basis the borough shows a loss in 1988, it actually saved money when
avoided costs are considered. For each ton the borough did not collect for conventional disposal
in 1988, relative to the 1985-87 average, the borough saved the tipping fee of $58.95. Table 4-1
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shows Pericasie reduced the quantity of waste collected for conventional disposal by 1,320 tons,
part of which went to recycling and part to diversion or reduced generatioa At $58.95 per ton,
the borough avoided $77,800 in landfill costs. Recycling and diversion have costs, however, that
offset some of these savings. Costs directly related to the start of the recycling program include
labor for collection and sorting recyclables, recycling pail purchases, and maintaining and
improving the recycling area. The increase in labor costs for recycling was accompanied by a
decrease in cost of conventional collection, since solid waste was collected only once each week in
1988, rather than twice as in previous years.
The recycling costs described thus far have been accounted for in the cash-based financial analysis
given, such that subtracting the operating loss from the avoided tipping fee costs takes into
account cost changes resulting from the switch to unit pricing and the addition of curbside
recycling. One item of capital equipment, a recycling trailer, was purchased for $18,000 specifi-
cally for the recycling program. It was purchased with state grant money, so Pericasie did not bear
this cost. Still, to give a complete picture of the borough's waste program, it is necessary to
amortize the cost of the trailer over its useful life. Assuming a life of seven years, the cost of the
trailer in the first year was $2,570. Finally, net savings from unit pricing and curbside recycling
in 1988 were:
$77,800 — 6,200 — 2,570 = $69,000.
Estimating what Perkasie's waste management costs would have been without extensive waste
diversion in 1988 further illuminates the cost impacts of unit pricing. First, if the estimated 120
tons of recyclables and 290 tons of conventional waste that were diverted had been collected and
disposed, the measurable avoided costs would have been lower. Recyclables revenue would have
increased $3,300 ($25-$30 per ton of newsprint), and landfill tipping costs would have increased
$17,100; combined, these add to a loss of $13,800. In addition, operating costs would have been
higher, since 410 tons more waste would have been collected. This represents an increase in the
conventional and recyclable waste collected of about 22 percent (410 tons on a base of 1,860
tons). Based on a 22 percent increase in labor and in truck and fuel expenses for collection,
operating costs would have increased $14,000, a conservative estimate since operating costs would
probably have increased less than proportionately with the increased waste collected. These
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estimates taken together lead to a net cost increase of $27,800, if no waste had been diverted.
Total avoided costs therefore become:
$69,000 — 27,800 = $41,200.
Perkasie's waste program has been successful at covering its operating costs during the first nine
months of 1989. As seen from the financial data for this time period, the borough has realized an
income of just over $2,000.
Future Changes in the Program
Presently Perkasie has some changes in mind for its waste handling service, but these changes
relate to the recycling program, not the bag program. The borough recently conducted a trial
program for recycling plastic and hopes to be able to start a recycling program for steel cans.
One problem facing Perkasie presently is that the newsprint market has been glutted since the
State of Pennsylvania made recycling mandatory in 1989. Tuturice Brothers paid Perkasie $25 to
30 per ton for the newsprint it collected in 1988. However, in 1989 the price offered by paper
mills for shredded newsprint fell dramatically, making it necessary for Tuturice Brothers to charge
$30 per ton to accept the papers. Perkasie chose another recycler to take its papers in 1989.
Container Corporation charges the borough $165 per load, with one load averaging 8 to 9 tons of
paper. Had Perkasie paid this price for paper disposal in 1988, the borough would have incurred
an additional expense of about $9,000 and a reduction in recyclables revenue of about $13,000.
Net savings, on an avoided cost basis, would have been $22,000 less than the $69,000 calculated
earlier. Still, Perkasie would have seen a savings equal to $47,000 ($69,000 — 22,000).
If the tonnage that was diverted had also been collected in 1988, we estimate Perkasie would have
paid another $2,300 for paper disposal, rather than receive $3,300 for its sale. The avoided cost
savings would then have been further reduced to:
$41,200 — 27,600 = $13,600 .
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Under this scenario, Perkasie would still have realized a savings as a result of introducing unit
pricing and curbside recycling in 1988, but the savings would have been sharply lower taking into
account waste diversion and, especially, the collapse in the recycled paper market.
4.2.2 Village of Dion, New York
Community Profile
The Village of Ilion is part of Herkimer County, New York, which is centrally located in the state,
halfway between New York City and Buffalo. Herkimer County records list Dion's population in
1980 as 9,190. Other demographic features specific to Dion are not available. Rather, a profile of
Herkimer County provides the best available description of the village. Projections for population
growth in the county between 1989 and 1990 are 3.1 percent to 4.7 percent. The Village Clerk's
estimation of Dion's population in 1989 as 9,500 is consistent with the predicted growth rate of the
county. The county's labor supply, taken to be descriptive of Dion's labor supply, consists
generally of high school graduates employed as assembly line workers, farm workers, and
production workers. In 1984, manufacturing provided the source for approximately 25 percent of
the county's personal income. Major employers in Ilion include Duofold, Inc., which manufac-
tures sportswear and knitwear, and Remington Arms, which produces firearms and traps. For
Herkimer County, the estimated effective buying income of median income households in 1980
was $14,033 (Herkimer County Chamber of Commerce and Herkimer County Area Development
Corporation, 1989).
Ilion is a rural area with predominantly single-family dwellings. There are two multi-unit
dwellings for elderly residents and three for low-income residents, and there are a few two- and
three-unit dwellings within the village. No descriptive statistics other than population are available
specifically for Ilion, but the Village Clerk stated that the population base and demographics of the
village have not changed measurably within the last five years (1984-1989). Consequently, no
such changes occurred coincidental with the start of Dion's unit pricing program to cause the
effects of the program to be distorted.
History of Waste Management Program
The Village of Ilion implemented a unit pricing program for solid waste services on June 1, 1988,
the beginning of fiscal year 1988-1989, hoping that this pricing mechanism would help combat the
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escalating cost of solid waste disposal and promote recycling. Like Perkasie, Dion's program is a
bag program. Residents pay entirely for waste disposal and collection services by purchasing the
village's designated bags. The municipality manages the program and collects the waste, which is
disposed in a privately owned landfill. Prior to the bag program, the Sanitation Department
provided a similar collection and disposal service, but this service was funded through general
taxes appropriated to meet the sanitation budget To set the price of the bags for the unit pricing
program, village officials estimated the number of bags that would be used by residents, and
priced the bags to cover their cost and the sanitation budget. Two sizes of bags are sold at local
stores at the following prices:
F/Y F/Y
88-89 88-90
30 gallon size $ 1.15 $ 1.50
16 gallon size 0.85 1.20
Residents are required to limit the amount of waste put into a bag to 50 pounds.
Service Features
The Sanitation Department changed some features of the service it offered when unit pricing was
adopted. Until that time residents used containers of their choice as waste receptacles. Hion chose
to adopt unit pricing through a bag system, meaning residents must put their waste in the
designated bags, or it will not be collected. Waste is still collected curbside, once each week,
except for bulky waste which is no longer picked up each regular collection day. Rather, large
trash items can be disposed of by arranging with the village bam to have them collected curbside
on the last Friday of each month for a fee of five dollars per item. Alternatively, residents can
haul such items to the village barn on the last Saturday of each month at predetermined rates per
vehicle load. Thirdly, residents may arrange for overnight use of a dumpster, at a price equal to
the village's cost of disposal.
As in the years prior to the start of the unit pricing program, the village's sanitation service is the
only one offered to residents. It is provided to all residences, single-family and multi-family,
within the city limits. Commercial entities are offered a dumpster service for a specified rate per
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yard of waste, or they, unlike residences, may contract with private haulers. Along with these
changes in the waste collection service, Ilion made changes to its recycling program as described
below.
Complementary Programs
Before the unit pricing program was implemented, Dion operated a voluntary recycling program
with both a drop-off recycling center and weekly curbside collection, at no direct costs to
participants. This did not change with the start of unit pricing, but Dion expanded its recycling
program to include more than just the newsprint, corrugated cardboard, and glass it had been
collecting. Dion began recycling tin cans and white goods as well. Residents wanting curbside
collection of recyclables are required to separate these items from other wastes, and place them in
containers they provide themselves—boxes or clearly marked bags. Recyclables are collected once
each week, the same day as solid waste, as a recycling truck follows the garbage packer.
An important change in Dion's recycling program came on June 1, 1989, when recycling became
mandatory by a county law passed September 1, 1988. Herkimer and Oneida counties have only
one landfill operating presently. If this landfill should close, the cost of disposal will increase 4 to
5 times due to the costs of transporting the waste to distant landfills. For this reason, and to meet
New York State waste reduction goals, the counties made recycling mandatory for all residents,
businesses, and organizations in the area, placing the burden of enforcing recycling on communi-
ties. The county set a baseline fine of $50 for violating the recycling law, and towns have added
to this to make the penalty more stringent Police departments, constables, and waste collectors
check for violators, in some cases by actually opening bags of trash to see that they contain no
recyclable materials. The law prohibits the disposal of the following materials at the landfill
according to the time schedule below:
April 1, 1989 Batteries, tires, major appliances
June 1, 1989 Glass containers, newspapers
September 1, 1989 Yardwaste
Spring 1990 Household metal cans, plastics
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The counties accept these materials for processing and marketing. To get better cooperation for
recycling, the counties separate the recyclable materials after they are collected, rather than
requiring participants to do the separating. Participation and cooperation have improved since the
start of the program, as indicated by the monthly increases in total recyclables collected. The two
counties are planning to build a joint $7 million center for processing recyclable materials.
In addition to curbside recycling, Dion offers its residents, at no charge, weekly curbside grass and
brush collection year-round. These materials are deemed recyclable, and though they must be
containerized or bundled, they must not be placed in the Dion-labeled garbage bags. Collection is
coincident with garbage pick-up. Also, residents may drop these materials off at the village bam,
where they are composted. This program operates the same now as it did before the introduction
of unit pricing.
Effects of Unit Pricing
Impacts on System Waste Flows
Gross Flows. The Village of Dion provided data for fiscal year 1987-88, before the unit pricing
program began, and for fiscal year 1988-89, after the unit pricing programs began. These data and
the changes associated with them are calculated in Table 4-8.
Based on the data in Table 4-8, unit pricing, along with some expansion in the recycling program,
effected major changes in Dion's waste streams. In the first year of the new waste management
program, Ilion reduced the quantity of waste coDected for landfilling by more than one-half of the
previous year's quantity. The quantity of recyclables coDected increased to nearly 2.5 times the
quantity coDected in 1987-88.
Had Dion implemented unit pricing with no changes in its recycling program, the waste coDected
in the added recycDng categories would have gone to conventional coDection and landfiDing. The
numbers in Table 4-8 can be adjusted accordingly to better approximate the effect of unit pricing
only. This adjustment is provided in Table 4-9.
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Table 4-8. Dion Solid Waste and Recyclable FLOW DATA
F/Y F/Y
87-88 88-89 Change Change
(tonsl) (tons) (tons) (%)
Conventional Solid Waste 4,380 2,120 -2,260 -52
Collected and Landfllled, Xc
Recyclables Collected
Corrugated cardboard
Newsprint
Glass
Tin cans
White goods
Total, X,
Total Waste Collected (Xc + Xr)
24
120
21
0
0
170
4,550
108
216
71
9
7
410 +240
2,530 -2,020
+141
-44
Note: The information received from Dion gave Xc in yards. This was converted to tonnage using the factor, 3 cu.
yd. = 1 ton.
1 All quantities are English tons.
Source: Personal communication. Hatch, 1989
This adjustment still shows a decrease of more than SO percent in the quantity of waste landfllled,
and a slightly lower response in recycling than was previously indicated. The change in the
amount of waste landfllled can be attributed to source reduction, increased recycling, and, possibly,
diversion. The village reports no noticeable increase in burning or illegal dumping, two potential
diversion methods. If, in fact, diversion did not increase, waste generated in Dion decreased by 44
percent after unit pricing. Because nion is located in a rural area, diversion may be more difficult
to detect than more urban areas such as Perkasie. Therefore, the 44 percent decrease may
overstate the reduction in waste generation. In addition, commercial customers have the option of
contracting with private haulers. No information was available to suggest the level of commercial
attrition, but assuming 3 percent of the reduction in waste collected stemmed from this, as in
Perkasie's case, Ilion would have collected about 2,200 tons of conventional waste in fiscal year
1988-89. Adjusting upwards for diversion by 20 percent overall, again estimated on the basis of
the Perkasie study, nion would have reported the waste flows given in Table 4-10.
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Table 4-9. Ilion Solid Waste and Recyclable Flow Data Adjusted to Reflect Unit Pricing
Only
Conventional Solid Waste
Collected and Landfllled, Xc
Recyclables Collected
Corrugated cardboard
Newsprint
Glass
Total, X,
Total Waste Collected (X€ + Xr)
F/Y
87-88
(tonsl)
4,380
24
120
21
170
4,550
F/Y
88-89
(tons)
2,136
108
216
71
395
2,530
Change
(tons)
-2,244
+225
-2,020
Change
(%)
-51
+132
-44
Note: The information received from Dion gave X^ in yards. This was converted to tonnage using the factor, 3 cu.
yd. = 1 ton.
'All quantities are English tons.
Table 4-10. Ilion Solid Waste and Recyclable Flows Adjusted FOR Possible Diversion
and Customer Attrition
Conventional Solid Waste
Collected and Landfilled, Xc
Recyclables Collected, X,
Waste Generated, X,l
F/Y
87-88
(tonsl)
4,380
170
4,550
F/Y
88-89
(tons)
2,750
490
3,240
Change
(tons)
-1,630
+320
-1,310
Change
(%)
-37
+188
-29
'Assumes no diversion beyond the 20 percent adjustment in Xe.
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Though these changes should be viewed with caution because of the limits in the data available,
Ilion's experience appears to indicate that the marginal contribution of unit pricing, given a
voluntary recycling program, can be substantial. In fact, nion reduced resulting waste generated
for collection and disposal outside household means by more than 25 percent.
Average Change Per Dollar. With the introduction of unit pricing, residents paid $1.15 for a
30-gallon bag. Assuming all conventional waste was disposed in this size bag at an average
weight per bag of 30 pounds, Dion residents paid $1.15 per 30 pounds of waste, or $77 per ton, to
dispose of waste after the introduction of unit pricing. Table 4-11 describes flow changes per
dollar change in price (based on data derived from Table 4-10 for a conservative estimate). Since
Ilion residents paid indirectly for waste services through taxes prior to unit pricing, the previous
cost associated with each additional ton disposed was zero.
Table 4-11. Ilion Annual Waste Flow Changes Per Dollar Price Increase
DX/DP
[ton/($/ton)j
Xc -21
X, 44
X, -17
% DX/DP
[(ton/100) / (Vton)]
-0.48
4-2.40
-0.38
These calculations suggest that unit pricing had a significant impact on Ilion's waste generation
behavior and stimulated participation in the voluntary curbside recycling program.
Arc Elasticity. As another measure of unit pricing's impact in nion, the arc elasticities listed
below are calculated and are also based on the conservative changes described in Table 4-10.
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EXg, Pc = -0.17
EXC, Pe = -0.22
EX,, Pc = +0.48
These elasticity calculations suggest that a 10 percent increase in the unit price will lead to a 1.7
percent decrease in waste generated, a 2.2 percent decrease in waste landfilled, and a 4.8 percent
increase in recyclables collected. These estimates are quite similar to those obtained for the
Borough of Perkasie.
Average Flows Per Person. The Village Clerk estimated Dion's population as 9,500. She
reported no measurable degree of change within the last 5 years, so 9,500 was used as the
population base to calculate average waste flows per person (with the conservative flows of Table
4-10) for the year before and the year after the introduction of unit pricing. These calculations are
presented in Table 4-12.
Table 4-12. Dion Waste Generation Per Resident
X, (T/person)
Xc (T/person)
X, (T/person)
F/Y
87-88
0.48
0.46
0.02
F/Y
88-89
0.34
0.29
0.05
Change
-0.14
-0.17
+0.03
%
Change
-29
-37
+150
Impacts on System Costs and Revenues
Financial data from nion were not available when this study was conducted. The Village Clerk
reported a 40 percent decrease in landfill costs for the first six months after the introduction of
unit pricing relative to the same six months the previous year. This sizeable decrease was
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observed despite a 28 percent increase in the landfill tipping fee, from $10 per yard to $14 per
yard. Based on these tipping fees and the yearly reduction in landfilled waste reported by nion in
Table 4-8, nion saw a decrease in landfill disposal costs from $131,400 in fiscal year 1987-88 to
$89,000 in 1988-89.
The only cost-related problem reported by the village was the glut in the newsprint market, which
led to Ilion's having to pay $5 per ton for disposal. As of August 1989, the village reported that it
had found an outlet for its newsprint such that the village could break even on the disposal of this
material.
The only other cost information from nion characterized the cost of waste services to households.
Taxes were used to pay for waste disposal prior to unit pricing, and taxes did, in fact, decrease
$10 per thousand when unit pricing was introduced. Too little information was provided to assess
what this decrease meant to an average Dion household in terms of comparative amounts spent on
waste services before and after unit pricing. Taxes rose in the second year of the unit pricing
program, but the increase was not related to any increase in the cost of the waste program. Even
with this increase, taxes are still lower than they were prior to unit pricing.
Future Changes in Program
The most significant change in flion's waste management program was the county's requirement
for mandatory recycling as of June 1, 1989. This change is discussed earlier in this case study.
The village plans to continue its program with no other modifications.
4.2.3 City of Seattle, Washington
Community Profile
Located on the Pacific Coast just 113 miles from the Canadian border, the City of Seattle offers a
study of unit pricing in an urban area, where the population density was 5,635 persons per square
mile in 1988. The city's population increased over the period 1980-88 by 0.4 percent to an
estimated population of 495,900. In 1988 there were 246,845 housing units in the city of which
54 percent were one unit structures and the remainder two or more unit structures. Average
household size was expected to decrease during the 1980's from 2.15 persons in 1980 to 2.01
persons in 1990. Of total land area in Seattle in 1980, 41 percent was classified as residential and
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13 percent as commercial and industrial. No change was projected in total area throughout the
1980's, and the percentages of land devoted to each of the two classifications described was
expected to remain fairly constant.
Seattle's population is predominantly white and educated. Blacks, Asians, and Native Americans,
combined, represented only 21 percent of the city's 1987 population. Seventy-seven percent were
white. Seattle reports nearly 80 percent of its residents have 12 or more years of education, and
28 percent 16 or more years.
Seattle incomes are relatively high in comparison to other large cities throughout the United States.
In 1988 median household income was projected as $38,000. Nearly 40 percent of all households
were classified as upper or upper middle-income in the 1980's.
Employment in metropolitan Seattle in 1987 was described as 20 percent manufacturing and 80
percent nonmanufacturing. The largest employer in the area is Boeing Company, an aircraft
manufacturer. The city reported a 5.5 percent growth in employment between June 1987 and June
1988, the result of growth in the aerospace, transportation equipment, food products, wood
products, and fish-processing industries. Total employment, reported as the number of full-time
equivalent positions, was projected to increase from 409,000 in 1980 to 460,000 in 1990 (Seattle
Department of Community Development, 1989).
A study of Seattle offers quite a contrast to small suburban Perkasie, Pennsylvania, and rural Dion,
New York. Unit pricing is not new to Seattle as it is to the other two selected communities.
Consequently, the Seattle study gives a different look at unit pricing.
Waste Management Program
History
Before 1961 Seattle's waste collection and disposal was paid for with tax money. In that year a
utility was formed, designed to be completely self-supporting with no general fund or tax revenue
subsidies. With the formation of this utility came the start of mandatory garbage charges, as the
utility provided unlimited residential garbage pick-up for a flat fee.
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In December 1969 the city started moving toward unit pricing. Residents paid a base rate for one
to four cans and an additional fee for each additional unit (bundle/can). The base rate, which was
$2.70 in 1969, had reached $6.85 by 1981, but the fee for each additional unit beyond the base
level of service stayed constant at $0.50 throughout this period. In January 1981 the fee structure
was revised such that residents paid a fixed fee for the first can and an additional fee for others.
This change was made to make the system more equitable for users and to provide an incentive to
recycle.
The utility manages the waste service and handles the billing, but it contracts with private haulers
for waste collection. These haulers take the waste to transfer stations owned and managed by the
city and from there to a regional county landfill. Special rates are offered (based on established
eligibility requirements) to low-income, elderly, and handicapped customers. All residences,
whether single-family or multi-family, are required to use the utility's variable rate waste service.
Service is not provided for commercial or industrial enterprises. They must use private contractors
or self-haul their waste.
Service Features
Though the fee structure changed over the years, the service provided by the utility essentially
remained the same. The major difference is the service level; that is, the quantity of waste
collected per unit price. Unlike the other communities studied, Seattle's unit pricing program is
not a bag program. Residents provided their own waste cans, until the city began providing
wheeled carts in 1989. Customers select a subscription level based on the number of cans or units
(which may be bundles) of waste they wish to have collected weekly. They are billed accordingly.
Waste collection is either curbside or backyard, and not until 1989 was there a differential in the
price of waste service depending on which collection location was selected.
Complementary Programs
Seattle currently has voluntary recycling and composting programs. Residents are not allowed to
comingle yard waste with other waste, as of January 1989. They may choose to compost it
themselves, self-haul it to a transfer station for composting, or leave it for curbside pickup. The
third option costs $2 per month, and the collection frequency depends on the time of year.
Landfilled waste has decreased since the January 1989 restriction against landfilling yardwaste.
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Private recyclers have operated voluntary recycling programs in Seattle for many years. Curbside
collection programs, operated by two different private contractors, began in February 1988. North
end residents who participate in curbside programs are provided three-bin carts for separating
containers (glass and cans), newsprint, and mixed paper. These carts are collected once each
week. Seventy-seven percent of all eligible customers in this area have signed up to participate.
South end residents are offered a monthly curbside collection program. They are provided
90-gallon plastic wheeled toters in which they place mixed recyclables. In this area 55 percent of
all eligible customers are signed up for the program. The cost to the city of contracting with these
private recyclers is included in the rates set for regular waste service. It should be noted, however,
that unlike Perkasie and Dion, a curbside recycling program was not in place during the time
period of our Seattle analysis.
Effects of Unit Pricing
Impacts on System Waste Flows
Gross Flows. Seattle's unit pricing program could not be examined exactly as were the other two
unit pricing programs, because this type of program is not new in Seattle. To study the effects of
unit pricing in Seattle, three years were selected, 1985-87, when program services and complemen-
tary programs stayed essentially the same, but rates increased substantially. Rates were set for a
basic level of service equal to one unit, and prices for higher levels of service increased propor-
tionately with the level of service. The base rate was priced differently for single and multi-family
customers, but the incremental rate for additional units of service was the same. Table 4-13 lists
the incremental rates for each additional unit of service for residential customers over that time
period.
Table 4-13. Seattle Monthly Residential Incremental Rates
Effective Date Rate per unit
1/1/85 $1.50
8/1/86 $3.30
6/1/87 $5.00
Source: Skumatz, 1989.
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Service level options changed between 1985 and 1986. In 1985 customers could request one or
two units of service, but beyond that, service was only offered in two-unit increments. These units
could be either cans or bundles of waste. Beginning in 1986 customers could subscribe to any
level of service desired in one-unit increments. For this study, the 1985 rate given in Table 4-13
is half the rate for the two-unit increment offered in that year. This adjustment was made to
permit comparisons between the years. Based on these unit rates, a yearly unit rate was calculated
depending on how much of each year was affected by the rate increases. These yearly per unit
rates and corresponding average monthly per unit rates are given in Table 4-14.
Table 4-14. Seattle Incremental Unit Rates
1985
1986
1987
Yearly
$18.00
27.00
51.50
Monthly
Average
$1.50
2.25
4.29
Change
0.75
2.04
% Change
50%
91
Waste flows and changes over the time period studied are described in Table 4-15. As expected,
recycling tonnages increased as rates increased; however, total residential convendonal tonnage for
the first years compared did not reflect the decrease expected in response to a rate change. The
tonnage changes are the result of not only rate changes, but also of program, demographic,
economic, and product changes occurring simultaneously.2 Consequently, a pure unit price effect
is difficult to determine from tonnage data alone. In addition, tonnage data includes all residential
tonnage, single and multi-family. While multi-family residents must use Seattle's unit priced
service, those whose rent includes their costs for waste services are not subject to the waste
reduction incentives offered by unit pricing. As a result, the response to unit pricing, as measured
by the change in total residential tonnage data, may be understated. No measure or estimate of the
portion of residential waste collected from multi-family units was available, but the portion is
likely to be substantial since over 40 percent of Seattle's households in 1980 resided in multi-
family structures. Seattle sources indicated that the difficulty of passing on unit pricing incentives
'See Table 4-18 for changes in the subscription level.
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to multi-family households is a problem for which they have not yet found a suitable solution.
This problem would be shared by other metropolitan areas with many large multi-family -
complexes.
Average Change Per Dollar. Based on data in Tables 4-14 and 4-15, the average changes in
tonnages were calculated (see Table 4-16).
Table 4-15. Seattle Solid Waste and Recyclable Flow Data
1985-86 1986-87 1985-86 1986-87
1985 1986 1987 Change Change Change Change
(tons) (tons) (tons) (tons) (tons) (%) (%)
X.'
x,2
185,000
40,600
190,000
41,600
188,000
44,400
+5,000
+1,000
-2,000
+2,800
+2.7
+2.5
-1.1
+6.7
'X,. = Conventional residential waste collected (estimated from Skumatz, 1989)
% = Residential recycling (Source: Bagby, 1989)
Table 4-16. Seattle Waste Flow Changes Per Dollar Price Increase
DX/DP % DX/DP
[ton/($/unit/month)] [(toa/100)/($/unit/month)]
xc
x,
1985-86
1986-87
1985-86
1986-87
+6,700
-980
+1,300
+1,400
+3.60
-0.54
+3.33
+3.28
Again, the calculations show conventional tonnage increasing as rate increased between 1985 and
1986. The expected decrease is seen the following year. The responses to a one dollar increase in
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price are not at all similar for the two years. Even for recycling, though both changes are positive,
the size of change per dollar increase varies.
Average Flows Per Household. Table 4-17 describes changes per household over the period of
interest. Again an increase is seen in conventional waste collected during the 1985-86 period.
The percentage change per household is smaller than the percentage change in tonnage calculated
previously, indicating that some of the growth in conventional tonnage collected was the result of
the increase in population. The percentage decrease in waste per household in 1986-87 is larger
than the percentage decrease in total residential tonnage collected, showing a greater effect of rate
increases and other factors when the population growth is accounted for than originally indicated
by the overall tonnage change. No change in recycling per household is seen during 1985-86,
indicating the tonnage change calculated earlier may simply be due to population growth. In
1986-87, factors influencing recycling behavior showed a smaller effect when measured per
household, a 5.5 percent increase, than when measured as total tonnage change, a 6.7 percent
increase. Again, some of the increase in recycling can be attributed to population growth.
Table 4-17. Seattle Waste Generation Per Household
Households
X./HH (ton/HH)
XyHH (ton/HH)
1985
223,850
0.83
0.18
1986
226,200
0.84
0.18
1987
229,500
0.82
0.19
1985-86
Change
(tons)
+2,350
+0.01
0.00
1985-86
Change
(%)
+1.0
+1.2
0.0
1986-87
Change
(tons)
+3,300
-0.02
+0.01
1986-87
Change
(%)
+1.4
-2.4
+5.5
Other Waste Behavior Measures. More descriptive measures of Seattle's waste behavior may be
single-family subscription levels, single-family weighted average number of cans of conventional
waste, and recycling as a percentage of total waste generated. Skumatz (1989) discussed these
measures in a study of Seattle's solid waste rates. Table 4-18 presents these measures.
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Table 4-18. Additional Measures of Seattle Waste Behavior
1985
1986
1987
Subscription Level Distribution:
1 can
2 cans
3 cans
4 or more cans
Weighted Average Number of Cans
Recycling as a percent of Waste Generated1
33%
21%
—
46%
2.7
22%
45%
31%
2%
22%
2.3
24%
58%
33%
4%
5%
1.7
26%
'Recycling here is the total of all recyclables, residential and commercial, collected as a percent of total residential and
commercial waste, including recyclables, collected or self-hauled for disposal.
Source: Skumatz, 1989.
Although total collected residential conventional tonnage increased between 1985 and 1986,
single-family households tended to subscribe to lower levels of service and averaged fewer cans of
waste. This may account for the low or apparently contradictory responses to Seattle's rate
increase during this period. That is, while subscription levels declined, collected tonnage grew.
For the 1986-87 rate increase, the direction of change for the measures in Table 4-18 are
consistent with that of the change in tonnage collected. Subscription levels and the weighted
average number of cans decreased, and collected residential conventional tonnage did likewise.
Over the three-year period examined, the percentage of total waste generated that was recycled
increased steadily, as one would expect during a time of increasing rates.
Efforts to explain Seattle's waste behavior first led to an examination of the type of data used for
analysis. The data present a problem in that tonnages are a weight-based measure, and rates are
set per can, a volume measure. While weight limits exist, they are difficult to enforce. Noting
this distinction between weight- and volume-based measures helps to explain Seattle's waste
behavior over the period studied, in terms of both tonnages and subscription levels. Seattle
sources indicated that customers began compacting more waste into each can disposed as rates
increased, often by stepping on the trash in the can. Such behavior was so noticeable that it was
dubbed the "Seattle Stomp."
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In 1985, unit prices were so low ($18 per year) that consumers apparently had little trouble
justifying the purchase of subscription levels they did not need to cover the weight of trash they
disposed. The excess levels purchased made handling the trash more convenient. Customers had
ample service during peak waste generation periods and could keep their cans lighter, since there
was no need to compact the trash. This helps to explain the difference between subscription
changes and tonnage changes in 1985-86. When costs jumped in 1985-86, the response was
primarily to reduce the subscription level and keep flows roughly the same, since weight limits
were not really binding. This helps explain why tonnage collected increased, while subscription
levels decreased. As more households reduced their subscriptions to levels consistent with the
amount of packed waste they generated (by weight), the incentive to reduce the amount of waste
generated, increased by yet another rate increase in 1986-87, was apparently more effective and
waste collected actually declined. Part of this decline may also be the result of higher use of
waste diversion methods as discussed in the previous two case studies.
Seattle sources believed that some problems with illegal dumping were experienced during rapid
rate increases. This belief was substantiated by reports from charitable organizations of unwanted
donations and garbage being left at unattended drop stations. Measures of diverted waste are very
difficult to obtain, however, and no such data were available. For all analyses discussed here, no
assumptions were made to attempt to estimate or incorporate the level of waste diverted.
Arc Elasticity. Based on information in Table 4-15, arc elasticities are calculated for conventional
waste collected and for recycling. They are:
EXc,Pe
EX.P,
1985-86
+0.065
+0.060
1986-87
-0.017
+0.104
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The negative elasticity reported for residential waste collected in 1986-87 is an indication that the
incentive to reduce waste began to take hold in that year, as was discussed earlier. This elasticity
is a very rough measure of the response to a rate increase given the accuracy of the data on
collected tonnage, the need to use a weighted price, and the likelihood that the full response to the
price increase had not yet been observed (the actual incremental price increase in 1987 occurred
only in the last six months of that year). An alternative, perhaps a more long-run measure, of the
effect of Seattle's variable can rate structure is provided by Skumatz's (1989) report on the city's
solid waste rates.
Skumatz evaluated the effectiveness of unit pricing by examining Seattle's multivariate tonnage
forecast. The most important variables affecting waste tonnage were household income, household
size, secondary recycling market prices, and rates. The results of this analysis showed a negative
relation between rates and the quantity of waste disposed by customers, holding all other factors
constant. The estimated constant point elasticity was -0.14, meaning a 10 percent increase in rates
would be accompanied by a 1.4 percent decline in waste disposed. In 1985-86 the quantity of
waste colleaed increased as the effects of factors other than the rate increase overshadowed the
negative price effect. Skumatz concludes that although a simple comparison does not show a
decrease in conventional waste quantities, these quantities are lower than they would have been
had price been hidden in a flat fee or taxes. Skumatz reports that 1987-88 data support this
conclusion. Data for those years indicate that tonnage disposed, tonnage per capita, and tonnage
per household decreased in response to a rate increase and the introduction of curbside recycling
programs. Again, difficulties arise in trying to attribute these changes to the rate increase only
(Skumatz 1989).
Impacts on System Costs
Over the three-year period 1985-87, nominal waste service rates increased rapidly because of
major changes in Seattle's waste disposal options. Seattle quit accepting waste at city landfills and
had to increase customer rates to cover the costs of closing its landfills and paying high tipping
fees to use King County Cedar Hills landfill. These cost increases were related to final disposal of
the waste and not to changes in the unit pricing program offered to customers. The average
monthly waste service bill is listed in Table 4-19.
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Table 4-19. Seattle Average Single-Family Monthly Garbage BHl(discounted by inflation)
1985
1986
1987
Average Bill
($)
$10.00
12.60
16.20
Change
($)
$2.60
3.60
Change
(%)
26%
29
Source: Skumatz, 1989.
The average bill increased over the three-year period examined. Although there were efforts by
customers after a rate increase to change waste generation behavior and lower their bills, the
changes that did occur were not sufficient to offset the rate increases, on average.
Program Changes Since 1987
Rates have continued to increase since 1987. In 1989 the rate per unit increased to nine dollars.
Other changes since 1987 have included the introduction of curbside recycling in 1988 and the
mandatory requirement that yard waste not be landfUled, changes discussed earlier. Also in 1989 a
40 percent price differential was introduced to make backyard pickup more expensive than
curbside collection. As a result, 95 percent of all customers chose curbside collection, and those
customers were given wheeled carts to use, rather than their own waste containers. Rate increases,
in combination with Seattle's program changes, have led to a decrease in the quantity of waste
landfilled in 1989, relative to 1988.
Seattle has set a goal to recycle 60 percent of its total waste generated by 1998. Consequently,
plans for the future include extending organized recycling to multi-unit dwellings and commercial
entities. Costs avoided by reducing conventional waste by offering convenient curbside recycling,
in combination with unit pricing, may be as high as $77 per ton. Even though the city pays $48
per ton to contract private haulers to collect and market recyclables, it can still realize a savings
from recycling. Because of high start-up costs, savings from recycling have not been realized yet,
but the city expects the program to be cost-effective over its life.
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In Seattle unit pricing seems to have helped to curb increases in waste tonnages relative to what
they would have been had a flat fee or taxes been used for purchasing waste services. Perhaps
unit pricing would be more effective if waste could be priced by weight rather than volume units.
In an effort to study the effect of such pricing, Seattle plans to start a pilot program for weight-
based pricing.
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Chapter 5
Conclusions and Issues
5.1 Introduction
Unit pricing programs come in many varieties and are part of broader systems of waste generation,
collection, and disposal. These systems involve many decision makers and multiple investment,
consumption, and process choices. It comes as no surprise, then, that unit pricing programs can
have many effects, not all of which may be attractive, and that these effects depend as much on
other features of the system as on the features of the unit pricing program itself.
This chapter reviews the effects observed when unit pricing programs were introduced or changed
in the three case study communities and draws some tentative conclusions regarding their
effectiveness in various settings. These conclusions are tentative because of both the limited
number of case studies involved and the inherent weaknesses of the data bases used as the basis
for these conclusions. This chapter also discusses some of the outstanding issues associated with
both the results of this study and the use and effectiveness of unit pricing generally.
5.2 Evidence of Effects from the Case Studies
5.2.1 Effects on Waste Generation, Collection, and Recycling
Examined here are the effects of two unit pricing programs, for Perkasie, Pennsylvania, and Hion,
New York, when there was a switch from a flat fee for service to charging by the bag. It was
estimated that both cities saw a large reduction in the weight of conventional waste collected: 41
percent for Perkasie and 37 percent for nion. In both instances, an effort was made to at least
partially adjust waste flow data to correct for concurrent changes in the community size, its waste
management programs, and household behavior that might bias estimates of reduced conventional
waste collection attributable to the unit pricing program.
Because both communities had curbside recycling programs, it might be argued that these
recycling programs, not unit pricing, resulted in the substantial reductions in conventional solid
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waste collection. The tentative conclusion, however, is that unit pricing programs and voluntary
recycling programs are complementary; the two programs operated together are more effective in
reducing conventional waste collection and increasing recycling than each is independently. In
support of this viewpoint, the observed changes in nion are coincident with a unit pricing program
begun after the curbside recycling program had been established. This, in combination with
observations from the Seattle case study, suggest that
recycling programs and unit pricing programs are most effective in reducing conventional
waste collections when they are operated together, and
joint curbside recycling and unit pricing programs can lead to substantial reductions in
conventional waste collection.
The Perkasie and Dion case studies also suggest that unit pricing has a significant impact on the
amount of waste generated. While it was not possible to observe waste generation directly,
reductions in waste generation were estimated based on assumptions regarding the amount of
waste diverted, combined with estimates of other waste flows before, during, and after the period
of analysis. Percentage reductions in waste generated were estimated to be 18 percent for Perkasie
and 29 percent for nion. Even allowing for some error in estimates of related waste flows, these
values are large enough to suggest that changes in waste generation are an important component of
changing waste flows when a community moves from a fee system to a unit pricing system.
As expected, unit pricing resulted in large increases in recycling. In Perkasie, the 190 percent
increase in the weight of recycled materials was attributed to the simultaneous introduction of unit
pricing, mandatory curbside recycling, and reduction from twice-a-week to once-a-week
conventional waste collection. In Dion, the 130 percent increase in the weight of voluntarily
recycled materials was attributed to the introduction of unit pricing.
Seattle differs from Perkasie and Ilion in a number of important respects: it is a major urban area;
it has had a unit pricing program, albeit a subscription program (defined below), in place since
1961; its unit prices are based on a "barrel" or "bundle" of solid waste and initially were
considerably lower than those in effect in Perkasie and nion; and it did not have a voluntary
curbside recycling program in operation during the two years in which waste flows and unit prices
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were examined. In those two years, there were some minor adjustments to the terms and
conditions of service and large increases in the price per unit.
It was found that there was actually a small increase in the amount of conventional waste collected
in Seattle during the first year of analysis and a slight decline in the second year. The hypothesis,
one that is supported both by observations on subscription levels during this time period and by
casual observation by Seattle residents, is that households initially responded to the price increase
by lowering their subscription level (the maximum number of units per week a household could
put out for collection) and compacting the waste in their barrels. After making best use of this
easy option, Seattle households began to reduce the amount of waste they generated, increase their
recycling, and divert waste toward some other means of disposal.
Data on recycling in Seattle were difficult to obtain for the period of analysis. The amount of
waste recycled was relatively high, even without a curbside program, but it didn't increase much
during the two years of analysis.
The Seattle experience suggests that aggregate household response to unit price increases may be
markedly less either where recycling facilities are not easily accessible or in a more urban setting
where the incentives of unit pricing are attenuated by a large proportion of multifamily housing.
Because of the special conditions associated with the Seattle experience, including unit prices that
initially were very low, one should hesitate to conclude that Seattle's lower response reflects either
a general condition faced by established unit pricing programs or a substantial weakening of the
effects of unit price changes at higher price levels.
5.2.2 Diversion of Solid Waste
The prospect of increased littering, backyard burning, and other unattractive means of waste
"disposal" is always a concern with unit pricing. It was found that backyard burning and disposal
of trash in commercial bins or in other service areas was a problem in Perkasie before burning was
prohibited and the enforcement of proper disposal requirements increased. All the jurisdictions,
however, claimed that they hadn't noticed that the unit pricing program or an increase in the unit
price charged increased littering or sewerage. Furthermore, Perkasie claims that the changes it
introduced in 1989 have eliminated the waste diversion problem in its service area. While these
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assurances are accepted for the purpose of analysis, there are no hard data to support these
observations (e.g., litter collection rates).
5.2.3 Elasticities
While not nearly as high as prices charged for other public services such as electric or telephone
service, the unit prices charged by the three case study communities were large enough to catch
the household's attention and affect their behavior. For example, the annual charge for an
additional bag of waste was $1.50 in Perkasie and $1.15 in Ilion. In Seattle in 1987 an additional
container cost $5.00 per month. The arc elasticity measures of waste flow response to these prices
in Perkasie and Dion were relatively small: -0.10 to -0.17 for waste generation, -0.26 to -0.22 for
conventional waste collection, and 0.49 to 0.48 for recycling. The Seattle arc elasticities we
calculated were five to ten times lower than those of Perkasie and Ilion, reflecting both the special
conditions surrounding its unit pricing program as well as the large number of multifamily units
characteristic of a major city. Recall also that Seattle's price elasticity of waste collection has
been estimated to be -0.14 using an alternative method of estimation.
Like the effects on waste flows noted before, these rather coarse elasticity estimates indicate that
households in the smaller communities did make significant changes in waste generation in
response to unit pricing. The substantial elasticities for conventional waste collection and
recycling in the smaller cities should be attributed to the combination of waste management
programs in those communities. While the marginal contribution of unit pricing to changes in
household behavior will vary with both background conditions and the method of measurement,
the case study evidence, especially that from Ilion, indicate that the marginal effects of unit pricing
have non-trivial effects on waste flows and waste management economics.
5.2.4 Costs and Revenues
The additional monetary cost of unit pricing and recycling programs in Perkasie and Ilion were
apparently more than offset by savings from reducing the amount of waste that had to be
conventionally disposed, and, in the case of Perkasie, reducing the frequency of conventional waste
service. Annual costs in Perkasie were roughly 10 percent lower than they would have been
without the programs. The cost data provided by Ilion are less complete, but by assuming that
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disposal costs were half of total costs one can estimate that the unit pricing program decreased cost
by roughly 15 percent.
In Seattle, increasing the unit price did not reduce costs very much if at all because there was such
a small decrease in the amount of conventional waste collection. The increase in price apparently
did, however, create something of a financial bind for the utility during the first year of the
analysis in that customers lowered their subscription level. This reduced utility revenues and
prompted an even greater price increase during the second period of analysis.
Some households shared in the cost reductions observed in Dion and Perkasie. The average
Perkasie household reduced solid waste collection and disposal expenses by at least an estimated
$25 per year. In Ilion, where waste collection had been financed out of general tax revenues,
property taxes were reduced by $10 per $1,000 assessed valuation.
5.2.5 Community Acceptance
In all three communities, but especially in the two small communities that just initiated unit
pricing, unit pricing was apparently well accepted by most of the population. The cost reductions
experienced by most households were apparently part of the reason for this acceptance. One might
suspect that a sense of satisfaction from both contributing to resource conservation and knowing
that those who generated the most mixed waste paid for that privilege also probably helped
promote initial acceptance. Perkasie apparently solved problems with compliance (e.g., backyard
burning) fairly inexpensively.
5.2.6 Health and Aesthetics
General community acceptance of the waste management programs in these unit pricing
communities reflects a certain degree of satisfaction with their aesthetic and, perhaps, health
attributes. As noted above, increased littering does not appear to be a problem for the programs in
the short run; and Perkasie addressed the health and aesthetic costs of backyard burning by a new
statute.
The frequency of collection has health and aesthetic implications and is an important feature of
waste management systems that employ unit pricing. Twice a week collection has been the norm
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in many areas because of the odor associated with decaying waste and the breeding cycle of flies.
The bag system, or a closed cart, is an integral part of a unit pricing program that also addresses
the odor and fly problem. Adopting a bagging or closed cart requirement as part of unit pricing
may remedy these aesthetic and health problems. In that case the waste manager can, as in the
case of Perkasie, reduce the frequency of collection. Consequently, he can either free resources
for use in other programs or reduce the costs of waste management
5.3 Unresolved Issues Related to Unit Pricing
An important unresolved issue, perhaps the most important one, pertains to the propriety of
extrapolating the findings of this study to other periods, other settings, and other unit pricing
programs. These are legitimate concerns and some of them are elaborated on to both caution the
reader and identify future research topics related to waste management generally and unit pricing
in particular.
5.3.1 Issues of Stability
It is difficult to know whether the observed effects are permanent. It is quite possible for
short-term effects of the sort identified in the case studies to differ from the long-term effects. It
may be that households have not fully responded to the price incentives or, having responded
vigorously, will revise their response to reduce the time and energy they devote to reducing waste
generation or increasing recycling.
To address these issues one needs to track the longer term experience of current unit pricing
programs. Programs such as that in Seattle, while they have a long history, differ in important
ways from most current programs. For example, most current unit pricing programs have "bag" or
"container" requirements, higher prices, and more elaborate complementary recycling programs.
These features were very uncommon even five years ago.
5.3.2 Issues of Design
Pricing All Waste Collected and Disposed
Designing a unit pricing program naturally raises the question of what price to charge for
collection and disposal of various categories of waste. All the case studies examined set a positive
price on collection of conventional mixed waste and a zero price on collection of recyclable
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wastes. It may be that such a strategy is either cost minimizing or economically efficient,
especially when factoring in administrative costs or incentives to "cheat," but this is not necessarily
the case. There are some categories of waste, such as aluminum containers or hazardous liquids,
that may merit a negative price by virtue of their value in recycling or their potential for doing
damage if conventionally disposed. Similarly, some recyclable materials that have such a high
cost of processing that they should (in theory, at least) have a price that is positive but less than
that applied to conventional mixed waste. Indeed, one can imagine a system in which the relative
prices change over time depending on market and other conditions. Of course, the resulting price
complexity raises another set of problems. In any case, the opportunities for, and effects of,
pricing of sorted waste need to be examined if one is to fully understand the full potential and
limitations of unit pricing.
Units of Measure
In principle, the units of measure employed in a unit pricing program should be definitive enough
to reward small changes in behavior and to be related to the costs of collection and disposal.
While Perkasie and Ilion offer two sizes of bags, Seattle's container may be too large to provide
the full range of incentives, particularly for households that generate only small amounts of waste.
The 1989 introduction of a mini-can (20 gallons as opposed to the regular 30-gallon can size) in
Seattle may help to address this problem. Furthermore, the case studies examined are
volume-based with weight limits, yet disposal charges are often based on weight. In effect, the
case studies don't address the effectiveness of a broad range of measurement options, including
actually weighing the amount of waste collected. Seattle, for example, is currently testing the
feasibility of weighing and recording the waste collected from each residence.
Voluntary vs. Mandatory Programs
This study intentionally selected unit pricing programs that were mandatory for residential
customers. As it turned out, the recycling programs for Perkasie and Dion are now both
mandatory. What, if any, are the advantages of voluntary unit pricing in waste management?
What are the pros and cons of voluntary and mandatory recycling when unit pricing of waste is
mandatory? Some are (1) voluntary recycling programs are more compatible with ideals of
personal freedom, (2) households may be more compliant with recycling programs coupled with a
positive monetary incentive, and (3) enforcement cost of voluntary recycling programs may be
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lower. On the other hand, there may be less participation in voluntary programs and a certain
amount of good will associated with mandatory programs because everyone has to participate.
The relative advantages of mandatory vs. voluntary design in either unit pricing or complementary
programs remains to be studied.
Enforcement
The case studies did not address optimal enforcement or penalties for violation of the conditions of
service for unit pricing, such as overfilling bags or putting waste in more containers than
contracted for. By the same token, and perhaps of equal importance, there was no examination of
the effects of changing enforcement and penalties for violating the terms of service for recycling
or littering. The case studies did suggest that: (1) contamination of recyclables with
non-recyclables or poor quality recyclables was not a problem and (2) littering was not significant.
Nevertheless, one may be concerned that they may be problems at higher unit prices.
Urban, Suburban, and Rural Settings
While the case studies do reflect different degrees of urbanization, only one community was
sampled in each setting; and the "rural" community, while it was in a rural setting, may not reflect
the effects of unit pricing in a service area with widely scattered homesites. For example, in some
rural settings "self-disposal" of household waste may be the norm even with free collection. Since
both case studies and literature review suggest that differences in the setting are important to the
effectiveness of different unit pricing program designs, one needs to examine additional programs
in each setting to obtain a more general understanding of what designs, if any, really make a
difference.
5.3.3 Issues of Purpose
As discussed earlier in this report, a community may have many reasons to adopt a unit pricing
program. The community's purpose provides the standard against which the effectiveness of its
program should be measured. In this section, some issues associated with the different purposes
for having a unit pricing program that arose during our study are discussed. Three instances are
noted in which unit pricing programs may operate at cross purposes even when increased littering
is not a problem.
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Minimizing Waste Generation and Increasing Recycling
One concern is that the unit price structure that most encourages recycling may discourage
reductions in waste generatioa In particular, if easily recyclable materials are heavier or bulkier
than non-recyclable materials, increasing the price paid for collection of conventional waste may
actually increase the amount of waste generated as it increases the amount available for recycling.
An increase in Xg with an increase in Pc is most likely to occur when E^,?,. is very high and
EXC,PC is very close to zero.
Minimizing Cost and Increasing Recycling
Another conflict may arise if the unit pricing program is used to provide revenues that are used to
subsidize the recycling program. Such a design may increase costs and conflict with the goal of
cost minimization.
Minimization of Which Costs?
As observed in Chapter 2, unit pricing programs can be designed and evaluated from a number of
different cost perspectives: the household, the waste manager, and the larger society. In these
case studies, an analysis framework was used that assumed households would respond to unit
pricing programs by minimizing their opportunity costs. There was no detailed examination,
however, in whether changes in household costs, defined in similarly broad terms, were positive or
negative. The facts that public "acceptance" of the programs was good and that monetary costs for
most households were lower in two communities are suggestive of a positive effect, but much
uncertainty surrounds the question of household costs.
By the same token, it was not possible to make a detailed examination of the "externalities" of
waste collection and disposal based on unit pricing. While qualitative assessments of externalities
associated with a variety of health and aesthetic concerns were obtained, it was not possible to
obtain specific estimates of changes that would contribute to a "net social cost" calculation of the
unit pricing programs. While, again, the observed costs are suggestive of a reduction in social cost
in at least two of the three programs examined, much uncertainty remains due to the absence of
cost estimates for externalities associated with waste management
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5.3.4 Other Issues
Unit pricing, and any user fee system, will cause taxpayers to forfeit that portion of the local
income tax deduction associated with waste management services. This loss only applies to
communities that switch from general revenue financing and households that itemize deductions,
but it will effectively raise the cost of waste services for affected households by as much as 50
percent, all other things equal.
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APPENDIX
A REVIEW OF LITERATURE ON THE ECONOMICS OF
MUNICIPAL SOLID WASTE MANAGEMENT
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APPENDIX
A REVIEW OF LITERATURE ON THE ECONOMICS OF
MUNICIPAL SOLID WASTE MANAGEMENT
Introduction
The effects of various municipal solid waste management and policy options have been examined
using a variety of methods and in many contexts over the last 20 years. In this section earlier
papers addressing the theoretical issues and empirical effects of unit pricing as related to consumer
decision making and waste management organization are briefly reviewed.
Household Behavior
J.M. McFarland's report in 1972 is seminal in that he concluded, based on a cross-section
regression analysis of 13 California municipalities, that the price elasticity for conventional waste
collection (Ex,.?^ was -0.455. McFariand also estimated an income elasticity for conventional
waste collection of 0.178 but did not find it to be significantly different from zero statistically.
Eflaw and Lanen (1979) have been critical of McFarland's estimates, claiming that the method
used was flawed in a variety of ways. In their own work, using time-series data for three cities,
Eflaw and Lanen estimated a mix of positive and negative price elasticities of demand for waste
collection and, for the most part, could not reject the null hypothesis that the own price elasticity
of conventional waste collection is zero. Goddard (1975) recognized problems with the McFariand
data and approach but appeared most concerned that the estimates are biased downward. Goddard
computed a 95 percent confidence interval of -0.333 to -0.777 for the elasticity estimate of
McFarland's estimated equatioa
Gueron (1972) provided a broad and farsighted mathematical expression of the problems
surrounding MSW collection and disposal, especially problems associated with environmental
externalities and public goods dimensions of waste management. She did not use the model for
mathematically based analysis, however, and acknowledged a scarcity of data needed for
implementation. She instead used the framework and the results of other empirical studies to
structure verbal arguments and arrive at tentative policy recommendations. In particular, Gueron
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was concerned that the price elasticity of demand for waste collection observed on other studies
may have been high due to increased diversion to burning, littering, etc., rather than reduced waste
generation. While noting various assumptions and qualifying conditions, she argued that "the
pricing of solid waste per container or pound collected would lead to an increase in pollution and
social damages from own disposal" that "would exceed the direct cost of collective handling"
(Gueron, 1972, p. 200). In the terminology of the report, Gueron was concerned that the cross
elasticity of demand for waste diversion is positive and greater than one and that the cross
elasticity of demand for waste generation is negative and close to zero.
By contrast, Goddard (1975) noted that "there is no good evidence pricing raises littering
significantly" (p. 173) and that even if the cross elasticity of demand for littering is positive, it is
probably not very large. Goddard suggested that control of littering possibly associated with unit
pricing can be achieved at relatively low cost by other policy instruments and that rejection of unit
pricing on the basis of Gueron's concerns is not warranted.
Wertz (1976) cited two early studies that claim to show large reductions in conventional solid
waste collection with reductions in the frequency of service from twice to once a week: a 30
percent reduction found by Quon et. al. (1968) for Chicago communities and a 47 percent
reduction cited by Hirsch (1965) for California municipalities. Wertz counts these observations as
"indirect evidence that the substitution effect of a higher price for service is not insubstantial" (p.
267). Wertz apparently based this contention on a finding from his theoretical model that the
response to a change in the frequency of collection is a scalar multiple of the effect of price on
waste generation/collection.1 The basis for this conclusion was disputed by Eflaw and Lanen
(1979).
Goddard (1975) cited an EPA report (EPA, 1973) that used Chicago area data and single equation
regressions to conclude that the income elasticity of conventional solid waste collection is positive
and statistically significant While the citation does present several forms of the estimated
equations, the data necessary to estimate elasticity measures for these specifications is only
provided for the double-logarithmic form where the income elasticity estimate is 0.404.
Wertz's model treats waste generation and waste collection as equivalent
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Wertz (1976) developed a rich model of household behavior. The model includes household
response to the price, frequency, and site of collection; household income; and a measure of
convenience that enters as an argument in the household's utility function. While the model has
many interesting features, it does not introduce recycling or diverting activities as options available
to the household. Wertz provides a comparative static analysis of household decision making
using this model, enriching the discussion with references to relevant empirical research. For
example, he reported the similarity of his income elasticity estimates for communities in the
Detroit area (of 0.279 and 0.272 evaluated at the means) and to the estimate reported by Downing
(1975) for observations made in Riverside, CA. (ExJ = 0.39). Wertz also estimated an arc
elasticity of demand for conventional waste collection of -0.15 based on an acknowledged
simplistic comparison of San Francisco with average waste collected per capita of other American
cities that don't charge unit prices. Wertz also used the model's comparative static results, along
with the estimates of price and frequency elasticities of demand, to conclude that his analysis
indicated the presence of "a nontrivial substitution against waste intensive goods on the part of
buyers" (p. 268) when they are faced with unit prices for waste collection.
Eflaw and Lanen (1979) examine the impact of user charges in five communities. Three of these
case study communities—Sacramento, Grand Rapids, and Tacoma—have unit pricing programs of
various kinds. Eflaw and Lanen were careful to try to develop simultaneous equation models of
household demand for waste collection that suited the programs found in each of the communities.
They then estimated various forms of the models using regressions of time-series data. The data
required to estimate these models, however, were formidable and data problems were compounded
by the relatively short interval over which some data were available. As noted above, they were
only able to demonstrate statistically that the price elasticity of conventional waste collection was
negative in a small number of cases. They observed "demand for household solid waste service,
in most cases, seems to be highly inelastic with respect to price" (p. 3). Eflaw and Lanen did,
however, find significant income elasticities of demand in the range of 0.20 to 0.40. They
observed that these values are on the low end of the estimates (0.3 to 0.7) made for Chicago waste
service areas by Tolley et al. (1978).
Miedema (1983) approached the question of unit pricing within the context of a general
equilibrium model of waste management This model includes production relationships for (1) a
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f
»
good that can be manufactured from either virgin or recycled material, (2) consumption, and (3)
policy variables such as subsidies, fees, and flat rate charges. Miedema specified particular
functional relationships and solved the model for a range of parameters to determine how the
policy variables perform under different states of the world, including status quo policies.
Disposal charges on virgin materials often results in superior outcomes [e.g., higher levels of real
income and lower levels of beverage consumption (waste generation)]. Some innovative policies
such as user fees (unit pricing), litter taxes, and recycling subsidies are actually inferior to the
status quo under diseconomies of scale in virgin materials manufacture. Unfortunately, Miedema
did not estimate the elasticities implicit in the various simulations that he ran so it is difficult to
relate his model and its results to the models and empirical information available from partial
equilibrium analyses.
Organizing Waste Management
Another essential dimension to waste management decision making is the selection of private or
public entities for directing or conducting waste management and collection. Communities can
chose to:
provide solid waste collection service through a public utility,
regulate solid waste service as a private monopoly, or
allow private firms to provide this service under terms and conditions of the firms'
choosing.
While there is some evidence that the second of these options is most economically efficient, at
least for collection (Kemper and Quigley, 1976; Savas, 1978) many communities still select the
other types of market organization.2 The market structure selected affects the analysis because it
suggests the possibility of different objectives on the part of solid waste managers depending on
the market organization. In particular, a public entity is unlikely to be subject to quite the same
pricing and service discipline as a private firm in a competitive market. Similarly, the market
organization is likely to affect the attractiveness of unit pricing as a financing option.
*Dubm and Navairo (1988) attribute these this choice to "the political power of rent-seeking interest groups and the
ideological preferences of the community" (1988, p. 220).
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References
Allan, Theresa, Brenda Plan, and David Morris. 1989. Beyond 25 Percent: Materials Recovery
Comes of Age. Washington, DC: The Institute of Local Self-Reliance.
Brown, Patricia Leigh. 1989. "Making Space for Trash: A New Frontier of Design." The New
York Times, July 27, Y13.
Bucks County Planning Commission. 1989. "Perkasie Borough Comprehensive Plan." Draft #1,
April 11.
Cook, James. 1988. "Not in Anybody's Backyard." Forbes (November 28): 172-174,176,180,
182.
Downing, P.B. 1975. The Distributional Impact of User Charges for Refuse Collection. Mimeo,
Virginia: Polytechnic Institute and State University.
Dubin, Jeffrey A., and Peter Navarro. 1988. "How Markets for Impure Public Goods Organize:
The Case of Household Refuse Collection." Journal of Law, Economics, and Organization
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