Over the course of the year, I had the opportunity to explore user fees in various municipalities in Southern Ontario. I did research through my Waste Management and Public Policy classes and learned a tonne about their theory, implementation and widespread use. Most of the work I did was on municipal waste management and why cities should stop using property taxes for waste collection and why we should alternatively introduce a user fee system for conservation purposes, economic opportunity and optimal efficiency.
Looking at a user fee system for waste management would require city taxpayers (residents, companies, businesses) to pay for the pick-up of general waste based on volume or weight rather than through general tax levies (property tax) that are unrelated to quantities of household waste. They are great systems because they are flexible and allow the household to set out one or two bags for free before being charged for collection. This will of course depend on the municipality but generally there is some leeway. For those not familiar with these systems, the economic rationale for user fees is that by attaching a cost to each bag of garbage a household produces, the economic incentive will encourage householders to recycle more and to reduce the amount of waste they produce. And due to the cost involved, the household would theoretically re-think how much waste it produces.
Hundreds of municipalities across Canada including Toronto rely on property taxes for financing residential waste management costs. Ostensibly though, Toronto has introduced some user fees for its waste and has seen waste management costs and volume go down by as much as 15%. One advantage of financing a city’s waste management system through property taxes is the low administrative requirements that accompanies this and it also provides a secure and predictable revenue stream for the city. But again, the argument, which I vigorously support, is that property taxes are a general tax that does not affect demand for municipal services. In other words, property tax systems may lack a cost incentive to reduce the total amount of waste a household generates because residents can continue to produce waste and pay their taxes at a fixed rate.
A user fee system can replace a property tax mechanism thereby sensitizing residents about their waste generation practices and providing them with an incentive to reduce and divert waste. When there is a direct cost involved for each garbage bag a household creates, the household will have a better understanding of the actual costs of waste. As an example, Peel has become the largest municipality in Ontario to adopt a user-pay three bag system where the first three bags of garbage are free. The city charges $1.00 a bag after that. In 2005 alone, Peel generated 442,015 tonnes of garbage under a two-bag limit, diverted 60 percent of its waste from landfills through recycling, reusing and cutting down on household waste production.
Toronto’s waste management workers are currently on strike. What does this mean for the city? It means mounting frustration, chaos, diffusion of municipal and civic responsibility and a wake-up call to our extravagant and consumerist lifestyles. Maybe a strike will provide us with the realization that we generate too much waste. Maybe we will have to re-think our waste management and turn to user fee systems which are environmentally and economically smarter. Could this strike act as an impetus to explore user fees in more depth?
Key message: User fees can relieve pressure on municipal property taxes and ultimately reduce the quantities of waste requiring disposal. This means less waste being sent to landfills which we know have numerous environmental health implications.
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