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John Nephew

Maplewood City Council Policy & Politics


A Remarkable Sense of Entitlement

Continuing my responses to the NSWMA's talking points provided by Douglas Carnival, I find that their next three points express a remarkable sense of entitlement, especially for an industry group that purports to advocate competition.

• A privately-held infrastructure has been built to serve this community need.

Many businesses have invested in privately-held infrastructure to serve public needs. Look at construction companies that do road and bridge projects, and how much they have to invest in heavy equipment. That doesn't entitle them to guaranteed returns on their capital; they still have to submit winning bids and actually do the work.

We live in a large and diverse metropolitan area, which predominantly has open hauling, as well as biddable contracts to serve organized communities. Anyone who fails to win a bid for part of Maplewood's business can continue to use the same infrastructure to serve other communities.

• Government intervention will result in loss of investments made by private companies without just compensation.

"Just compensation" is one of NSWMA's hobby horses. They believe that when communities decide to organize trash hauling with competitive bidding, as opposed to cartel-type arrangements that guarantee haulers their current market share and prop up their profit margins, that any companies who fail to compete successfully deserve a government handout to pay them for the work they're not doing.

Communities have been choosing various forms of organized collection in Minnesota for more than a hundred years. State law gives cities the cities and counties the explicit authority to do it, and lays out a specific process to follow. Waste in general is a highly regulated field on the state, federal, and local level, subject to constantly changing mandates and requirements. Courts have time and again found that organized collection does not constitute a regulatory taking for displaced businesses.

Given these facts, it's hard to imagine that any halfway competent business in the waste management field would fail to account for regulatory risk as part of their business plan and disclosures to investors. (Check out the Form 10-K SEC filings of the publicly traded haulers for examples.) Whether it's a public firm or private, that regulatory risk should be included in any valuation model used to calculate the company's worth.

Anyone who invests in or builds a company in this industry should know what they're getting into and take responsibility for their choices, not demand a government bailout disguised as "just compensation" if their investment turns sour.

• Small haulers may be forced out of the community and lose customers through no fault of their own.

I don't know if it's still the case, but last fall when I checked their membership list on the NSWMA website, none of Maplewood's small haulers were listed. Talking about "small haulers" is a rhetorical strategy, used to short circuit our logic and make us read the sentence in emotional terms and identify with the "little guy."

Another appeal to sympathy is embedded in the phrase "through no fault of their own." Look past the victim rhetoric at what it's saying: A company that fails to win a contract through a competitive bidding process is not responsible for that end result. Really? I have trouble believing that anyone who can offer this line with a straight face is really a believer in the market or competition.

So let's edit Mr. Carnival's phrase for accuracy:

"Large, multinational conglomerates headquartered in other states and foreign countries may lose customers through their unwillingness or inability to compete."

To which I would respond: So what?

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“’Just compensation’ is one of NSWMA's hobby horses. They believe that when communities decide to organize trash hauling … any companies who fail to compete successfully deserve a government handout to pay them for the work they're not doing.”

Two points on that:

1-Communities have not decided anything. Rather, individuals at the City Council will be making this decision based on their studies which will very likely, in my humble opinion, be favorable towards a City council dictated system. From what I have heard and seen in our area, far more people are pro choice than pro City Council’s choice.

2-The Council would be artificially putting the garbage businesses in this position by granting monopoly contracts to a single hauler for X amount of time. Sure, they can competitively bid for the job as you have pointed out but if they lose out on it, they lose their “just compensation.” While I don’t agree that government should give them any compensation, I also disagree with the idea that the council should artificially get in the way to blocking their business. Let them fail or lose compensation by fault of their own, not by the dictates of the City Council. In that sense, the trash haulers are in the position “through no fault of their own.”

An example:
Say that you issue monopoly rights to the lowest bidder grocery company for X period of time. The grocery stores that did not win the “rights” in the “competitive bid” would be losing potential compensation at no fault of their own. It’s a result of the City Council granting temporary monopoly status of one single grocery company.

I understand how you are spinning “no fault of their own” and that is another, although odd, way to look at. The difference is that one is real competition and the other artificial.

Regarding the edited Carnival guy’s quote.
I am not sure what makes them unable or unwilling, as I will have to look into it if that is true. Personally, I don’t care if it is all true or not. Is it bad if we receive investment, services, or goods from foreign countries? Is it bad that foreigners build businesses or own part of them in our city or state? Do you have something against foreigners? I would guess not. Whether or not a business is owned by a foreign company, a conglomerate, or individually, they provide a good or service that domestic consumers voluntarily desire and there is absolutely nothing wrong with that. The same applies to the PEOPLE of Maplewood choosing their own waste disposal company.


(part 1 of 2)

"Communities" is a short way of referring to any and all decision-making methods that may lead to organized collection. Depending on the community, it may be elected officials who decide; it may be officials appointed by elected officials; it may even be direct referendum that decides. Whatever the decision-making method, the NSWMA regards organization as a taking in the constitutional sense, legal precedents notwithstanding, and part of their lobbying agenda is to win handouts for their industry whenever it happens.

Trash is a field that government gets involved in, and that's been true for longer than anyone in the trash business today has been alive. If you choose to get into a field that is closely entwined with government regulation and decisions, whether it's trash hauling or being a defense contractor, I think you should take responsibility for that choice and not play the victim card if you don't react as well or profitably to government decisions as do your competitors.

I don't think grocers are a useful analogy. Government doesn't just get involved for the heck of it; there needs to be at least an argument for a compelling public interest, even if folks may disagree on it. A better but still imperfect comparison might be liquor stores. In some Minnesota cities, the only liquor stores are city-owned. In some states (at least Pennsylvania was like this when I lived there briefly 20 years ago), all liquor stores are owned by the state government. I would imagine that the government role is justified because these business involve the sale of a controlled substance, alcohol, which has the potential for deleterious public impacts. Similarly, waste and sanitation have long been areas of government involvement because of their effect on the public, and an actual history of deleterious public impacts. I would not myself favor government liquor stores, because I am not aware of any substantial way that they serve the public's interest in alcohol regulation any better than private liquor stores do. In contrast, there are numerous ways that government involvement in organized waste can improve efficiency, save money, and serve various environmental goals. And from what I've seen, it does it most efficiently by working with private industry through a competitive bidding process.

(part 2 of 2)

As far as drawing some distinction between "real" and "artificial" competition, I don't find this particularly useful. The whole point of competition is that you submit your best, whether it's running a race or bidding for a contract, and the best submission wins. Is a 5k race "artificial" if it's hosted by a government entity as opposed to a private one? You might say that any system with government involvement, such as anti-trust protections, is creating "artificial" competition. But then you're in the position of saying that unregulated economic systems where successful entities often establish enduring monopoly power (i.e., zero competition in layman's terms) demonstrate "real" competition.

I realize people disagree on the function of competition. Some people seem to venerate it as an end in itself. Others, myself included, see it as a means to an end. If "real" competition gets worse outcomes (such as higher costs, greater public expense from environmental and other impacts, etc.) than "artificial" competition, I'm happy to take "artificial" competition. I'm interested in evaluating this on a factual basis, not on theory or dogma.

Whether a firm is competing for one customer or a neighborhood of customers, if they fail to win the business I don't see how they can disclaim it as "not my fault." If you didn't submit your best bid and that's why you didn't win, then we could say it's your fault for being too greedy (unwilling). If you submitted your very best bid and still lost, then it's your fault for not being as good as the competition (unable). The "it wasn't my fault" line is just a rhetorical strategy to win sympathy for a group that is looking out for its own economic interest.

As far as business ownership: No, I have no problem with foreign or out-of-state companies, and I welcome their involvement in the organizing process if we go down that path. But it's deceptive for Mr. Carnival to make himself out as representing the small, local guys in Maplewood. Since he's the one who wrote the original sentence -- what does he have against the large haulers, anyhow? Is he embarassed that they cut his paycheck? Taking a page out of your book, why does he not proudly come forward to sing the praises of large multinational trash companies?

The answer, again, is that it's a calculated rhetorical strategy; he wants our thinking to be colored by empathy for an imaginary person we think is similar to us. In my view, if his statement has any impact on policy, it should be identical whether the point is phrased as Mr. Carnival did or as I "edited" it. If you read the two sentences and have two different reactions (perhaps "oh, we should protect them!" to one and "they can take care of themselves" to the other), it reveals the impact of his rhetorical ploy.

The NSWMA employs inconsistent and contradictory arguments without hesitation, because their goal is not good public policy based on factual information and well-reasoned decisions -- it's winning whatever outcome they believe will bring them the most financial benefit in the issue of the moment. They shake one fist against government involvement with a lot of principled-sounding bluster, while the other palm is extended for taxpayer handout for "just compensation," to clean up waste from the past, or for government help recovering methane from landfills.

Thank you for replying Mr. Nephew.
1 of 2

The grocery example was a bit off, I admit. I was short on time and it was the first thing in my mind based on a simple “what goes in” (food and packaging), “must come out” (waste disposal) analogy. I too thought of alcohol after the fact.

I see your angle is that government always has and will be involved with waste disposal as opposed to other areas of business where it is not (as) common so garbage collectors should expect this possibility in their risk analysis. Businesses understanding of regulations and potential government decisions should be considered. Many make decisions based on the current setup and that is understandable. Is it possible that the government will take control over the personal choices of the citizens in that area? I guess so but that could happen in any sector (some more likely than others of course).

"Is a 5k race "artificial" if it's hosted by a government entity as opposed to a private one?"

This is not a good example because running a race (government or private hosted) is an individual choice. A winner of a race does not affect the citizens or can either party mandate that the citizens support them. On the other hand, if the few in the city council choose a waste collection winner, we have no choice but to comply (or move). Big difference.

2 of 2
Competition is basically a means to an end unless you equate liberty with competition. It would then be in the words of Lord Acton, that liberty “is the highest political end.” It provides people with individual choices and creates a dynamic for improving technology and overall efficiency. I suspect that this is where you and others think waste disposal is not moving fast enough in the “efficient” direction that you envision. I understand this point but think that the studies will overstate your claims. Also, we do not know of the unintended consequences. Judging other cities may shed some light on this but it does not settle what the negative consequences will actually be for us in the short and long term. This may not be of concern to you but there are unseen consequences.

I stand by the natural and artificial versions of competition. When individuals democratically vote in the market there is a natural competition among like buyers and like sellers. On the other hand, when government grants legal monopoly rights based on bids for a service already provided naturally, they remove the democratic right of the citizens to individually vote for who they prefer. Unlike government, if a private business does something that we disagree with or don’t like, we can vote for a different one (or become his competition). That said, bids for a temporary government granted monopoly is an attempt to use a market mechanism within the scope of government and I know that it is a better alternative to being government run. It’s simply different because you have the legal power to grant monopoly status, the citizens don’t.

To be honest, I don’t know of this Mr. Carnival but it appears he is representing all or some of the garbage business (that’s what I gather). Sure, they like anyone will use lines aimed at sympathy, be it political, social, or economic sympathy. I would expect them to look out for their own interest just as I would expect you to look out for your own personal interest (political or whatever). They want freedom in one spot when it’s in their interest, yet they may advocate regulations or laws in other areas to “protect the public” (though it is really to help block competition). Capturing regulators and politicians is a very common problem. What is in the “public’s interest” may also be in a business’s interest. Intentions may be different from the point of view of the regulator, the politician, or a business but the outcome is the same.

Though I don’t know the whole story, I would tend to agree with you that they don’t need compensation for what they did illegally. When they accept the waste, they hold rights to it. If they violated government or private property rights by leaking methane or material into that property, they should certainly pay for damages. Forgive me if I totally misunderstood that last little bit.


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