Every week, early in the morning, trucks rumble down neighborhood streets, stopping and starting at every house. One truck picks up trash, another hauls away recycling, and still another takes yard debris.
Then every month the bill comes. What, exactly, does it pay for?
The price doesn't seem that high in comparison to the water or electricity bill, but it also doesn't change like the other bills do. The more water a customer uses, the higher the water bill is that month. Same with electricity or heat. But if a person creates no trash or if the can is filled to the brim, the garbage bill doesn't change.
The reason for the fairly stable garbage bill is that local governments – cities and counties – are the ones that set it. But those rates aren’t set in a vacuum – several government agencies along with private-sector haulers get a piece of the rate-setting action.
Oregon has a franchise system for trash collection. This means that local governments don't pick up the trash, instead the service is contracted out to a hauler.
"Every jurisdiction has a franchise system that's geographically based, meaning each hauler has a neighborhood or portion of the community where they collect trash," said Matt Korot, a program director in Metro's solid waste department. "The reasoning behind it is to limit the number of trucks going up and down streets."
For example, Portland contracts with 18 garbage haulers and each serves a different part of the city. Those 18 haulers charge prices set by the Portland City Council, and vary only by whether the trash customer is in the flat lands east of the Willamette, or in the hilly western portion of the city. By creating geographical boundaries, the city ensures that only one company's trucks will be going down a residential street every week.
"All haulers apply the same monthly rate within the jurisdiction they are operating in," Korot said.
But what do those monthly bills pay for? The majority of a garbage bill goes to the private hauler. The remainder pays for upkeep of the infrastructure related to garbage, from the roads the trucks drive on to the landfills the trash finally settles in.
There are a number of factors that influence the amount a customer pays, but the bill can be grouped into five general categories: the cost of collection, tipping fees, the franchise fee, the hauler's administrative costs, and the hauler's profit.
The cost of collection can be thought of as the price of going door-to-door and hauling away every person's trash.
"It's everything directly 'connected to the can' as we say," said Ray Phelps, director of regulatory affairs for Republic Services, the hauler for Lake Oswego. "It pays for everything from the cost of the trucks to insurance and worker salaries."
Although this price varies slightly by jurisdiction the cost of collection is the largest chunk of a customer's bill. In Portland this cost is about 50 percent of the monthly bill, while in Lake Oswego it's slightly less at 42 percent.
Tipping fees pay for what happens at the next stage of the garbage life cycle. Once the haulers pick the garbage up from the curb, they take it to a nearby transfer station, where it is processed before being shipped to a landfill.
Two of the Portland-region transfer stations are operated by Metro, Metro Central and Metro South, and Metro sets the tipping fees for those stations. Metro also establishes what regional fees need to be a part of private-sector tipping fees. Another part of every tipping fee is the Oregon Department of Environmental Quality’s fee to regulate garbage collection.
These fees are applied to every ton of garbage collected. That cost gets passed along to the consumer and is usually the second largest chunk of a customer's monthly bill making up 31 and 40 percent in Lake Oswego and Beaverton respectively.
The tipping fee is one of two parts of a household’s monthly bill that don't go to the private hauler. The other is a franchise fee, which is essentially a fee charged by a local government to the hauler for the privilege of using local roads. Franchise fees are intended to pay for maintaining the roads, sidewalks and other infrastructure that the hauler uses while operating in the city or county. Most utilities pay a franchise fee.
The franchise fee is usually established in the county or city's code as a fixed percentage of the monthly bill. In Portland and Lake Oswego, the fee is set at 5 percent of the total bill.
The hauler’s administrative costs make up a significant portion of the monthly bill, ranging anywhere from 15 percent in Lake Oswego to 20 percent in Portland. This amount pays for the hauling company's management, finance, and human resources staff, whatever costs are associated with running the business – not delivering the service.
Finally, built into every household's monthly garbage bill is a profit margin for the hauler. This revenue does not go toward investing in new trucks or an expansion of service – that's built into other parts of the bill. It is purely profit for the private contractor.
"It's an opportunity to earn profit," explained Arianne Sperry, a manager in Portland's solid waste and recycling program. "Garbage rates are set based on an average hauler’s costs. Not every hauler makes the same profit or collects the total profit possible."
Since local governments set the rates, but a contractor delivers the service, rate setting is an important process for both sides. For governments it can be political, while contractors need the rates to adjust to changing costs. Typically, the private-sector haulers lobby the city or county for a rate increase, but the frequency varies by jurisdiction.
"There is no set process for how rate increase requests come in from the hauler," said Jordan Wheeler, an assistant to Lake Oswego's city manager. "Typically, they give us a heads up and prepare the supporting materials. Our council then reviews and considers the rate increase request based on criteria outlined in the agreement with the hauler."
For Lake Oswego, that criteria includes current and future costs as well as the need for equipment replacement and rates other cities charge. Beaverton considers similar criteria and is currently in the middle of a rate review process, but with multiple haulers the process is more complicated.
"We start with the annual reporting data from the haulers and look at their profit margin," said Scott Keller, a manager in Beaverton’s solid waste and recycling program. "If they are within the 7 to 11 percent profit range established in the code, then we do nothing with the rate. If the profit margin is below that target range then we project expenses and revenues for the coming year and increase the rate to get the hauler profit in the target range."
The frequency of rate increases varies by jurisdiction. Keller said that historically Beaverton raises rates every four to nine years. Conversely, Portland brings even small rate changes to city council every year.
The weekly rumbling of trucks down neighborhood streets has a price, but the cost of collecting what’s in each can isn’t the only thing a garbage bill pays for. The unseen costs of running a business, processing the waste and maintaining streets all pay a role in the final dollar amount of a customer’s monthly bill.