Trash Accounting

The city's commercial garbage operation continues to lose truckloads of cash

Within cash-poor City Hall, any change in the numbers seems acceptable.

Regardless of the way they are added.

Take the city's money-losing garbage business. Eager to show profit, the City Council blessed City Manager James Keene's plan this summer to begin incremental charges for service and to redo the accounting.

Most of the change is purely cosmetic.

The solid waste department, operating in the fiscal year that began July 1 on a $24.7 million budget, has been reclassified an "enterprise fund," a term government uses to try to convince the public that the operation spends what it takes in. (The city budget has another $11.5 million in capital projects and equipment for solid waste.) The city's water utility, Tucson Water, is the prime example of a municipal enterprise fund, and its virtual monopoly assures that it is bulging with cash.

Other departments, such as the city's golf courses, are not as flush. Despite the historic enterprise label, they have lost money and needed subsidies.

There are other examples close at hand. Pima County has operated enterprise funds like the sewer department with great financial success and, in the last year, financial failure. Kino Community Hospital was long on the books as an enterprise fund, even though it required an annual taxpayer subsidy ranging from $2 million to nearly $20 million. The county has also alternately branded its money-losing Rillito Race Track and Planning and Development Services as enterprise funds, despite operating deficits.

Keene implemented another change, also cosmetic. He placed David Modeer, the publicity-hungry director of Tucson Water, as an overseer, or hand-holder, of solid waste Director Eliseo Garza.

The accounting change alone could hasten the city's retreat from all but the landfill component of its garbage business. It could go the way of Phoenix--which divides the city into grids and bids against private haulers--or Portland, Ore., which is out of the municipal garbage business altogether.

Vice Mayor Fred Ronstadt, a Republican who represents midtown Ward 6, is most active in pushing for full-cost recovery in garbage operations or the alternative--getting the city out of the garbage collection business if it costs cannot be recouped. Throughout his budget town halls in the spring and early summer, Ronstadt addressed the city's heaping deficits--$36 million, on a $1 billion budget--by explaining that the City Council actually had control over only a fraction of the total: the general fund. With that smaller pie, every bit of savings is meaningful, Ronstadt preached.

That may strike a cord with those who see expensive city of Tucson garbage trucks rumbling through Marana or elsewhere outside Tucson, picking up garbage at Circle Ks, Carl's Jr. restaurants, a mobile home park, or even Bank of America branches. The city has eight commercial garbage accounts outside Tucson. Those eight have 27 trash containers spread among their various locations.

Garza, a Texan who is a holdover from the tumultuous tenure of former City Manager Michael F. Brown, was on vacation through Oct. 11 and unavailable for comment. That left Deputy Director Sam Chandler--whose career is a mix of private sector and government waste hauling--to answer whether it would be cheaper for the city to stop at least the out-of-city collection, thus saving fuel, tires and wear-and-tear on the garbage trucks.

Chandler says the city is careful not to push too far outside the city. Those out-of-city collections are not far, he said, from other routes. Moreover, trash from northwest-side locations is not hauled back to the city's sprawling Los Reales Landfill on the southside. It is taken to an Ina Road facility in ton-for-ton (3,000 a month) exchange with Waste Management, the country's garbage behemoth. Waste Management has about 50 percent of the market here and the city has about a third, while smaller, but increasingly aggressive companies like Saguaro Environmental Services are making inroads.

Private haulers are pressing the city for more complete details about bidding and costs.

Citing a 4-year-old state law, the National Solid Wastes Management Association warned Keene in a June 1 letter that Tucson's garbage collection outside the city limits must include payments to any taxing entity that would have normally been paid by a private trash company.

"Further, the city must segregate the records of any services outside the municipality from any other municipal records and must ensure that no municipal funds are used to subsidize waste or garbage collection and disposal services outside the city," Joseph F. Abate, the attorney for the Arizona chapter of the National Solid Wastes Management Association, informed Keene.

While the records are separated, city officials concede there is no guarantee under the current accounting system that the out-of-city garbage service does not receive some taxpayer subsidy.

In broad terms, the city's commercial garbage operation needs $5.65 million in revenue to operate in the black, Chandler and city budget analysts say. But industry experts, including representatives of the private haulers, say the city is not including all its costs for administrative overhead and even the landfill tipping fees--the amount charged per ton to dump at Los Reales. The city, according to Chandler, is charging a total of between $2,500 and $2,800 a month for those 27 sites.

Full breakdowns can be elusive. The city has normal commercial pickup plus roll-offs (the big units typically seen at construction sites) and numerous civic event and recycling collections. One month into the fiscal year, the city was on pace to top the revenue benchmark, Chandler said. The city showed $575,000 in collections for August, putting it at an annual rate of $6.9 million.

How well those numbers hold up is anyone's guess.

A consultant's study showed the city how to make full-cost recovery, but the city has failed to implement the changes. A phased-in increase for commercial accounts, to account for landfill tipping fees, has not yet been assessed to customers; it is at least a year behind schedule, some clients say.

Chandler said the City Council will be presented with the full scope of costs and consequences of various levels of privatization during planning and negotiations for the 2005-06 budget.