Trash Hauling Inflation
Now that the deadline for proposals is past, I wanted to dive back into some analysis of the trash hauling issue, in particular the economics (which our council has identified as our #1 goal in evaluating organized collection).
A frequent comment I've heard from people opposed to organized collection is the claim that even if there are immediate savings, future prices will increase if the government gets involved. Sometimes it's as though people imagine that prices don't increase under the current system. The pricing formula set out in our RFP does allow for annual price changes over the term of a contract, but those changes are tied to specific objective data -- the consumer price index, diesel fuel index, and the actual cost of tipping fees for trash disposal. In contrast, prices at the present time are set entirely at the discretion of the hauler, who may or may not link them in some way to objective economic data or actual costs in providing the service, or may cloak them in deceptive terms so as to throw off the scent of bargain-hunting consumers.
To illustrate how it works in the current system, let me refer you to a set of bills in my collection. One resident helpfully sent me not just their latest bill, but four bills, each from a different year (2008, 2009, 2010, 2011). This household has used the same hauler, and the same container size, so it gives us an apples-to-apples comparison across four years. This is a local hauler who seems to have relatively little pricing variation across their customer base. (In other words, this hauler's customers tend to pay the same amount for the same containers, unlike other haulers where two customers with the same container may pay wildly divergent prices. Example: This customer pays 155% more than this customer, with the same hauler and same container.)
Here is a table of the monthly prices charged to this customer across four years, excluding taxes:
Perhaps it's coincidence, but I find it interesting that after Maplewood began seriously discussing organized collection in late 2010, the next year's percentage price increase was single-digit rather than double-digit.
To put these enormous price increases in context, consider what inflation has been like over these years in general terms and also specific to diesel fuel. Here is a table comparing those increases to the CPI and average diesel prices. (For CPI, I am using December-to-December comparisons for the period just ended; i.e., the 2011 number is the inflation figure for December 2010 over December 2009. For diesel, I am using the U.S. Energy Information Administration's annual average prices per gallon for on-highway diesel ultra-low sulfur diesel for the previous year.)
Diesel prices rocketed up almost 30% across 2008, leading this hauler to impose a fuel surcharge of 65 cents per month in 2009. But the following year, when diesel prices dropped by 35% -- and in fact averaged about 16% less than before the fuel surcharge was imposed -- the trash hauler did not reduce or eliminate the fuel surcharge. On the contrary, they increased it by 20 cents a month, or nearly 31%! Last year diesel prices rebounded (now being slightly higher than they were before the fuel surcharge was imposed), and the fuel surcharge was held flat.
We can only conclude that the fuel surcharge is arbitrary, and simply a way of cloaking a major price increase, since it only increases and does not appear to have an actual correlation to fuel prices.
Looking at general inflation, the difference between the hauler price increases and the consumer price index is breathtaking -- they've been increasing prices by 2.6 to 173 times the rate of inflation each year. If the total price had increased only in line with inflation, the customer would be paying $9.96 today, not $13.40.
A significant economic benefit of organized collection, besides likely immediate savings, is protection from large, arbitrary future price increases, which haulers have a history of applying under the open hauling system we have today.
And, needless to say, it's obvious why haulers and their trade association would be willing to put a lot of money and effort into stopping organized collection and preserving their ability to jack up prices and their own profits with impunity.
A frequent comment I've heard from people opposed to organized collection is the claim that even if there are immediate savings, future prices will increase if the government gets involved. Sometimes it's as though people imagine that prices don't increase under the current system. The pricing formula set out in our RFP does allow for annual price changes over the term of a contract, but those changes are tied to specific objective data -- the consumer price index, diesel fuel index, and the actual cost of tipping fees for trash disposal. In contrast, prices at the present time are set entirely at the discretion of the hauler, who may or may not link them in some way to objective economic data or actual costs in providing the service, or may cloak them in deceptive terms so as to throw off the scent of bargain-hunting consumers.
To illustrate how it works in the current system, let me refer you to a set of bills in my collection. One resident helpfully sent me not just their latest bill, but four bills, each from a different year (2008, 2009, 2010, 2011). This household has used the same hauler, and the same container size, so it gives us an apples-to-apples comparison across four years. This is a local hauler who seems to have relatively little pricing variation across their customer base. (In other words, this hauler's customers tend to pay the same amount for the same containers, unlike other haulers where two customers with the same container may pay wildly divergent prices. Example: This customer pays 155% more than this customer, with the same hauler and same container.)
Here is a table of the monthly prices charged to this customer across four years, excluding taxes:
| Year | Base Charge | Fuel Surcharge | Total | Total Increase |
| 2008 | $9.55 | $0 | $9.55 | |
| 2009 | $10.55 | $0.65 | $11.20 | 17.28% |
| 2010 | $12.05 | $0.85 | $12.90 | 15.18% |
| 2011 | $12.55 | $0.85 | $13.40 | 3.88% |
Perhaps it's coincidence, but I find it interesting that after Maplewood began seriously discussing organized collection in late 2010, the next year's percentage price increase was single-digit rather than double-digit.
To put these enormous price increases in context, consider what inflation has been like over these years in general terms and also specific to diesel fuel. Here is a table comparing those increases to the CPI and average diesel prices. (For CPI, I am using December-to-December comparisons for the period just ended; i.e., the 2011 number is the inflation figure for December 2010 over December 2009. For diesel, I am using the U.S. Energy Information Administration's annual average prices per gallon for on-highway diesel ultra-low sulfur diesel for the previous year.)
| Year | Hauler Price Increase | Inflation (CPI) | Diesel Price/Gallon | Diesel Price Change |
| 2008 | n/a | 4.10% | 2.942 | |
| 2009 | 17.28% | 0.10% | 3.814 | 29.64% |
| 2010 | 15.18% | 2.70% | 2.473 | -35.16% |
| 2011 | 3.88% | 1.50% | 2.993 | 21.03% |
Diesel prices rocketed up almost 30% across 2008, leading this hauler to impose a fuel surcharge of 65 cents per month in 2009. But the following year, when diesel prices dropped by 35% -- and in fact averaged about 16% less than before the fuel surcharge was imposed -- the trash hauler did not reduce or eliminate the fuel surcharge. On the contrary, they increased it by 20 cents a month, or nearly 31%! Last year diesel prices rebounded (now being slightly higher than they were before the fuel surcharge was imposed), and the fuel surcharge was held flat.
We can only conclude that the fuel surcharge is arbitrary, and simply a way of cloaking a major price increase, since it only increases and does not appear to have an actual correlation to fuel prices.
Looking at general inflation, the difference between the hauler price increases and the consumer price index is breathtaking -- they've been increasing prices by 2.6 to 173 times the rate of inflation each year. If the total price had increased only in line with inflation, the customer would be paying $9.96 today, not $13.40.
A significant economic benefit of organized collection, besides likely immediate savings, is protection from large, arbitrary future price increases, which haulers have a history of applying under the open hauling system we have today.
And, needless to say, it's obvious why haulers and their trade association would be willing to put a lot of money and effort into stopping organized collection and preserving their ability to jack up prices and their own profits with impunity.
Labels: organized collection
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