Tupelo officials split over commercial garbage fees


Daily Journal

Proponents of a plan to lure competitors to Tupelo's solid waste collection market are plowing ground that proved fallow before.

And they are just as cautious about the new outcome.

“Well, I have heard several comments from citizens who are very much for competition,” said at-large City Councilman Ed Neelly, a leader in the push to expand the number of garbage haulers. “As far as the council members, I would not hazard a guess at this point. I think progress has been made as far as obtaining a consensus in concerned.”

The heart of the new plan lies in the way the city licenses commercial waste haulers. Rather than extracting a large annual regulatory fee for the right to handle business garbage in Tupelo, the proposal would substantially reduce that fee while adding incremental fees linked to the number of customers a hauler serves.

That would limit startup costs for new companies in the market while boosting income to the city, proponents said. It should also keep the lid on related residential garbage rates, they contend. The city's current contract for collection of residential garbage runs out in July.

If it's not broken…

On the other hand, the city's only active commercial hauler – Waste Management Inc. – would not only lose its effective local monopoly, but company officials maintain the plan would significantly boost costs, which would have to be passed on to its business clients.

In turn, residential rates could be put in jeopardy because of the uncertainty of commercial income, opponents of the new plan have argued. Meanwhile, nobody's complaining about the current system, they say.

“We may be trying to fix something that's not broken,” Ward 3 City Councilman Smith Heavner observed last week.

The city's annual permit fee is set at $105,000 a year, a figure considered steep for companies that would start business without a customer and might have to wait up to three years or so to make a pitch for many clients. That's because most commercial hauling is done by contract, and many contracts are fairly long-term.

The new plan would set the annual permit fee at $25,000. Supporters say that should be low enough to attract at least two more players to the waste game. But the proposal also would set an annual commercial garbage container fee of $120, payable monthly.

Neelly said recently the container fee should raise more than $200,000 a year in addition to the normal permit fees. For example, if three companies entered the commercial hauling business, the city could be expected to reap about $275,000 a year.

That's $170,000 more than it's now getting.

Added burden?

But Waste Management officials noted most of the new fees would fall on their company, at least in the early years, because it now services all the commercial containers in town. Initially, the arrangement could be expected to at least double the $105,000 the company now pays to do business in Tupelo.

That additional cost would have to be passed on to its customers, Waste Management spokesman Johnny Green said last week.

In 1983 – the year the city got out of the waste collection business itself – Waste Management paid a $95,000 commercial franchise fee with the stipulation that if any other contractor was allowed to operate without paying as much, the deal would be void.

Ward 1 City Councilman Dick Hill noted that fee has increased only $10,000 in 20 years, while Waste Management's commercial customer base in Tupelo during that period has mushroomed.

“I don't think that's a valid argument,” he said of the company's higher cost concerns.

Residential ramifications

Somewhere high in the debate is how commercial waste fees affect the city's residential contract, also held by Waste Management for the past two decades.

The background mix includes Tupelo's membership in the Three Rivers Solid Waste Management Authority, owner of a regional landfill in Pontotoc County that officials argue needs more volume to hold down costs for all its county and municipal members.

Most Three Rivers members want Tupelo's commercial wastes hauled to the Pontotoc landfill, and in fact many contend the city is obligated to direct the waste there. Tupelo does require that residential wastes go to Three Rivers, but city officials have maintained through the years a commercial hauler could carry wastes where it pleased.

Hill, Tupelo's former representative on the Three Rivers authority and a strong supporter of a fee change, said competition could relieve the dispute because at least some of the city's commercial waste could be expected to end up in the Pontotoc landfill.

Waste Management, which owns Prairie Bluff landfill in Chickasaw County, has naturally hauled as much of its volume as possible to its own facility.

“They (competitors) could go anywhere they wanted to,” Hill said.

Council skeptics voiced concerns that residential rates may go up if Waste Management has to pay more in commercial fees or another company that has no immediate commercial business gets the residential contract.

“Whatever the council does, it has the responsibility (to citizens) to handle garbage at the most affordable price we can get them,” council President Danny Barrows said. “If you get three to four proposals, what if everybody's higher (than now)?”

Ward 4 Councilwoman Nettie Davis also expressed worries about the jobs of Waste Management's employees.

“This is the best job they've every had,” she said.

Neelly responded that current workers could be expected to be hired by any company gaining the contract. Meanwhile, he said, competition was the best way to assure low residential rates.

The past is past

That call to competition hasn't worked in the past. Nor have lawsuits, although there is a veiled threat hanging around that legal action may result if the city doesn't change its policy now.

Waste giant Browning Ferris Industries went to the courts in 1995 with the argument that the city's then $98,500 permit fee was too high and an illegal restraint on trade. But the suit languished without action until it was eventually dismissed as a stale case.

BFI's objection followed a 5-4 council vote to maintain the high commercial permit fee while adding an industrial waste category that would cost only $10,000 a year. Shortly thereafter, the council voted 5-4 to rescind to rescind the original vote and set a smaller franchise fee with a 5 percent charge on revenues and equipment values. However, that vote was vetoed by then-Mayor Jack Marshall.

In late 2000, the call for competition was raised again, with a proposed ordinance setting a $15,000 annual fee and $100 per container. The council killed it in a 5-4 vote.

Hill said backers have put the new proposal on the council's study agenda for Tuesday and plan to call a vote April 15.

“I think it's important that the public have a couple of weeks to get to understand (the plan),” he said. “I know the business community is overwhelmingly in favor of competition for waste hauling.”

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