How does commercial carting work now?

The City regulates commercial waste collection and sets waste disposal standards for businesses; each business independently contracts with a commercial carter that is licensed by the Business Integrity Commission (BIC).  State and federal laws set minimum safety and labor standards in the industry.

BIC was established in 1996 (called the Trade Waste Commission until 2001) to root out organized crime and corruption in commercial carting.² Often seen as having succeeded in that regard, BIC’s primary focus remains ensuring the integrity of commercial carters. As part of its oversight role, BIC collects operational and financial data from licensed commercial carters.  Currently, 90 licensed commercial carters operate in New York City and regularly collect refuse and recycling from about 108,000 customers generating 3.5 million tons of waste per year.³ The carters range from small 1- to 3-truck companies to large enterprises, like Action Environmental, Waste Connections, and Five Star Carting, three carters in the City with more than 10,000 customers each.

BIC also sets a ceiling price for commercial waste collection. Currently, the price is $20.76 per cubic yard or $13.62 per 100 pounds.⁴ Each business negotiates a price at or below that ceiling for the specific services it needs directly with its vendor.  The amount paid for commercial waste collection and disposal varies; according to DSNY, small customers pay on average $13.20 per 100 pounds while large customers pay an average of $9.60 per 100 pounds.⁵

Local laws set standards for commercial carters and businesses with regard to waste management. The requirement that commercial enterprises recycle paper and some other materials was instituted in 1992 and updated in February 2016. In January 2017 the City began to require certain businesses that generate substantial organic waste to process that waste separately through composting or a similar technology.⁶ The City stepped up enforcement of commercial recycling laws last year.

Local Law 145 passed in 2013 requires commercial waste carters’ vehicles to meet the 2007 United States Environmental Protection Agency standard for particulate matter by 2019.⁷ This requirement is intended to address the environmental impacts of an aged fleet; many observers expect implementation of this law to drive some small commercial waste firms out of business.⁸

However, many rules pertaining to terms and conditions of employment by commercial waste carters and maintenance of their fleets are under the auspices of state and federal regulators, such as the Occupational Safety and Health Administration (OSHA), federal Department of Transportation (DOT), and the New York State Department of Environmental Conservation (DEC).

Why is the current system inefficient?

Inefficiency of collections and operations is the primary problem in commercial waste identified by CBC. In addition, the harmful environmental impact of unnecessary truck miles is also a concern. Poor enforcement of safety regulations, from vehicle maintenance to traffic laws to labor standards, have been subject to substantial analysis and media coverage recently; while a legitimate concern for the City and the industry, they are not a focus of CBC’s earlier work nor of this blog post.⁹

Under the current system, each City block can be (and often is) served by numerous different commercial carters that may also have pickups in different neighborhoods and boroughs. This results in long routes, sometimes exceeding 100 miles according to DSNY, which crisscross City streets; collection is inefficient, with one block seeing dozens of garbage trucks each night.¹⁰ In addition to the costs borne by the businesses and carters from the inefficient operations, the City and its taxpayers bear the costs of the externalities that result: hundreds of heavy trucks driving across the City each night contribute to wear and tear on the roads, emissions in the air, and noise pollution.

What is the City proposing?

DSNY proposes a Commercial Waste Zone (CWZ) program that would divide the City into 20 zones, comprised of one or more community districts.  Within each zone, carters would compete to win contracts from the City to provide commercial waste collection services.  Each zone would have three to five carters; districts with four or five carters would be in Manhattan.¹¹ No one carter would be permitted to provide service in more than three-quarters of the zones.

In bidding for zones, carters would specify the maximum price they would charge a business. The City would require carters to offer recycling and organic collection at a lower rate than refuse collection. Compliance with Local Law 145 setting minimum vehicle emission standards would be required.  Contracts would be for 10 years with extension options.¹²

DSNY will soon begin to conduct an Environmental Impact Study, and a Local Law establishing the CWZ program must be enacted by the City Council.  The City proposes to begin procurement in 2020 and award contracts in 2021.  Transition to the new system would start in 2022 and be completed in 2023; DSNY would provide emergency backup service during the transition.  

What are the benefits of nonexclusive Commercial Waste Zones?

The proposed CWZs will rationalize collection routes by limiting the number of carters serving each zone.  As a result, efficiency will increase with more customers per route mile and fewer total vehicle miles traveled—a reduction of 18 million miles of truck traffic.¹³ The latter reduction will also reduce the externalities the City and its residents have been absorbing—wear and tear on roads, lower air quality, and noise pollution.

Businesses will be able to negotiate with the carters that operate in their zones, maintaining competition in pricing and customer service.  Businesses can select the carter who provides the best price and service for their specific business needs, be it daily pickup or late night service or organic composting. And businesses can switch if they are dissatisfied.¹⁴

Carters who win contracts from the City will benefit from a substantial and predictable customer base, and 10 year contracts that allow them to plan investment in vehicles, infrastructure, and labor force. 

The City will have greater opportunity to mandate and enforce safety measures through contracts with the commercial carters than through licensure.  When developing the Request for Proposals upon which carters will submit bids, the City will specify vehicle standards, environmental standards, and require that carters provide all of the mandated collection services (with carters allowed to subcontract for specific services, such as organic collection or recycling). 

What are the arguments against the proposal?

Opponents of CWZs raise five arguments, and each should be addressed. 

One concern is that CWZs impinge on an “open-market” system that is operating well. In fact, the proposal maintains competition essential to market systems by setting nonexclusive zones rather than the exclusive zones.  Furthermore, the City intends to cap the number of zones in which any one carter can operate, which will prevent a monopoly in commercial carting and support a vibrant competitive sector.  Moreover, the recent reporting on safety and labor violations among current carters suggests a sector suffering from a race to the bottom that is cutting corners and putting lives at risk—a far cry from operating well.¹⁵

A second concern is that rates may increase.  Each commercial carter will propose a maximum price for any zone upon which they are bidding, and DSNY will give significant weight to this factor in ranking and awarding the contracts. Improvements in collection efficiency, continued competition, and long-term stability of the zone system will create opportunities for price reductions. Given the substantial variation in rates currently paid between customers, with the average small business paying 38 percent more than the average large business, it is likely that savings will vary across businesses. Those with weaker negotiating positions currently will be better positioned to secure more advantageous pricing, while large businesses will maintain bargaining leverage. Lastly, the higher environmental, safety, and labor standards under the zone system may exert upward pressure on prices, but that would be due to the change in regulations, rather than as a function of the zone system itself.

A third argument is that the City could regulate the industry more vigorously via the BIC without converting to a zoned arrangement.  The mission of the BIC has been to root out organized crime and ensure integrity in the industry; it is not necessarily the best entity to curb other types of abuses.¹⁶ Furthermore, many of the regulations that commercial carters operate under are not set in City law, which limits the City’s enforcement to revocation of licenses.¹⁷ The scope of requirements that can be set by the City under competitive procurement is broader and allows for more sophisticated enforcement tools.

A fourth line of attack is that some carters, especially small carters, will be put out of business.  This is correct—the zones cannot support 90 companies—and currently many companies struggle financially.¹⁸ Inefficient companies will close down, but that is a consequence of a more efficient system that saves customers money and reduces negative external costs like noise and air pollution imposed on residents. The City’s role is not to ensure that every carter remains in business; however, the proposal creates new opportunities for some smaller companies to specialize and subcontract and thereby sustain jobs.  Additionally, carters can continue to offer specialized collection, such as construction and demolition, medical waste, and grease removal in New York City or offer waste collection services in neighboring jurisdictions.

The last concern is that the environmental benefits, in terms of more recycling and fewer vehicle miles, will not be attained.  DSNY analysis provides credible evidence that a substantial reduction in vehicle miles traveled will result from the new routes, and the proposal includes financial incentives to support reduced waste and greater recycling.¹⁹

Conclusion

DSNY has conducted a transparent and data-driven policy development process with frequent outreach to an advisory board comprised of carters, labor unions, businesses, and advocates; the result is a balanced proposal that addresses the concerns of businesses with respect to competition and customer service while generating environmental benefits for all city residents.  CBC reaffirms its support for commercial waste zones in New York City.