November 30, 2018
As part of the FY2016 budget approval process during fall of 2015, the City of Chicago for the first time imposed a waste removal fee of $9.50 per month on approximately 600,000 residents already receiving waste removal services provided by City of Chicago employees. Chicago residences receiving City-provided garbage collection include single family homes and multi-unit buildings with four or fewer units. Chicago residents who live in properties with five or more units, as well as owners of commercial and industrial properties, receive their waste removal services from private haulers.
The City estimated that the $9.50 fee charged to the 600,000 households would generate $61.2 million annually. Actual revenue in 2016 and 2017 was $54.4 million and $64.0 million, respectively. Budget estimates for FY2018 and FY2019 continued to project the garbage fee would generate $61.2 million in both years. The Civic Federation supported the City of Chicago’s implementation of the $9.50 per month garbage fee and the creation of a separate fund to track fee collection, a move that brought the City in line with practices in many other U.S. cities.
However, the revenue generated from the garbage fee is not sufficient to cover the full cost of garbage removal. As of FY2018, the City of Chicago estimated that it would spend $230.9 million on residential solid waste removal services.[1] The $61.2 million in estimated revenue would only cover 26.5% of total garbage removal cost. A City of Chicago Inspector General report issued June 21, 2018 said the City overestimated the cost of providing garbage collection services by approximately $45.2 million. Even with an overestimation in expenses tied to garbage collection, the garbage collection fee would only cover 33% of garbage collection costs. This means the remaining 67% must be paid for by other sources of revenue within the budget.
By comparison, a New York-based Citizens Budget Commission report that analyzed 2012 U.S. Census Bureau data found that several cities recovered more than 95% of the cost associated with garbage collection including Dallas, Los Angeles, Phoenix, San Antonio, San Diego and San Jose.
The Civic Federation believes it is reasonable for residents receiving garbage collection services from the City of Chicago to pay toward the true cost of the service. Although the City committed itself to not increasing the $9.50 monthly fee until after 2019, the Civic Federation recommends that the City annually evaluate the fee as part of the budget approval process because the fee is tied directly to a service being provided. Additional garbage collection revenue could free up valuable resources needed to cover forthcoming pension contribution increases and a number of other pressing financial issues facing the City.
[1] Information provided by City of Chicago budget staff, November 7, 2017.