Good Morning.

Thank you Chairman McMahon and members of the Committee for providing this opportunity for the New York City Comptroller's Office to discuss the status of recycling in New York City.

The decision to suspend the glass and plastic recycling program was predicated on projections that the Department of Sanitation (DOS) would achieve significant short-term savings. During the budget discussions in preparation for our current fiscal year, the Administration called for ending all metal, glass and plastic recycling in New York City and projected that this action would save the City more than $53 million. The City Council and the Administration debated the merits of ending the recycling program and came to a compromise, agreeing to the suspension of glass and plastic recycling, while keeping metal recycling. The Administration projected that this compromise would save New York City more than $39 million.

These projected savings were intended to outweigh the fact that this action undercuts the tens of millions of dollars in capital and educational investments made in building a robust recycling program. It is important to recall that DOS's 1998 Modification of its Comprehensive Solid Waste Management Plan concluded that as recycling diversion rates increased, the resulting avoided refuse collection and waste export costs made recycling the low-cost waste management method for New York City. When citywide recycling diversion rates approached 25%, DOS found that the incremental cost for recycling collection and processing was $41 per ton - significantly cheaper than refuse collection and disposal. Attached to this testimony is Table 4-2 from this report summarizing DOS's findings.

The Comptroller's Office presented its review of DOS's projected savings in comments to the Mayoral and City Council Recycling Task Force (Task Force) on December 4, 2002. This review raised serious questions as to whether the suspension of recycling would achieve the savings predicted. DOS's projected $39 million savings were based upon two major assumptions. First, DOS projected significant savings from processing glass and plastic under waste export contracts rather than recycling contracts. Second, DOS projected significant declines in the total number of truck-shifts required to manage the City's waste stream.

It appears that DOS overstated the savings the City would achieve due to processing glass and plastic under waste export contracts rather than recycling contracts. DOS's projected budget savings appear to have failed to acknowledge the value of the City's share of the sale of recycled material under a revenue sharing agreement with the recycling vendors. Once the revenue sharing agreement is accounted for, DOS's savings from exporting glass and plastic as waste are approximately $3.4 million rather than $12.6 million out of the total $39 million savings.

Moreover, the Comptroller's review of the productivity data DOS provided to the Task Force, which covered July through November of Fiscal Year 2003, found that DOS reduced the total number of collection truck-shifts by 80 per week, or less than 2 percent of the collection truck-shifts per week required to manage the City's waste. A decline of 80 collection truck-shifts per week represents a savings of approximately $2.6 million. I understand that Commissioner Doherty stated at the March 28, 2003 City Council Budget Hearing that refuse collection productivity had increased since DOS provided collection truck-shift data to the Task Force. The Comptroller's Office looks forward to reviewing this new information and evaluating the impact these productivity increases may have on DOS's budget.

Since the Comptroller's Office submitted its December 2002 comments to the Task Force, several significant events have occurred that require a close evaluation of the decision to maintain the suspension of glass and plastic recycling. First, DOS has received a bid of $70 per ton to process metal, glass and plastic, a savings of $12 per ton over the previous bids received by DOS.

Second, DOS has received new waste export bids that will increase the average cost per ton of exporting waste from Brooklyn to $75 per ton. The citywide average cost to tip refuse at waste transfer stations and incinerators, once the Brooklyn contract(s) are in place, will rise to $69 per ton. In Queens, the average disposal tip fee is already $71 per ton and many collection trucks are required to travel to New Jersey and Long Island to dispose of their waste, significantly increasing the per ton costs. In the Preliminary Mayor's Management Report (MMR), DOS acknowledges these added transportation costs and reports that the average cost per ton to dispose of the City's waste is now $105 per ton. DOS should provide a detailed accounting of how transportation costs are considered when presenting the costs and productivity of refuse collection and recycling.

Third, an unforeseen indirect negative impact to the City's budget from the suspension of glass and plastic recycling has been a significant decline in paper recycling rates. DOS's most recent Residential Recycling Diversion Report found a 12 percent decline in paper recycling rates since the suspension of glass and plastic recycling. The public's confusion over the status of the recycling program is likely one of the primary reasons paper recycling rates have declined. Using the direct cost of waste export reported in the Preliminary MMR, the resulting loss of revenue and increased waste export costs due to lower paper recycling rates to the City is nearly $5 million.

Using the data DOS provided the Task Force, it appears that DOS initially achieved minimal, if any, savings by suspending glass and plastic recycling. Accordingly, the original rationale for suspending the recycling program - large fiscal savings - appears no longer valid. Further, the increased waste export costs, lower paper recycling rates, and lower recycling processing costs requires that the City Council and the Administration evaluate carefully whether the suspension of glass and plastic recycling continues to be an effective strategy for meeting DOS's short and long-term budget goals.

Since the closure of the Fresh Kills Landfill, waste disposal costs have been one of the fastest growing expenses to the City's budget. The Comptroller's Office looks forward to working with the Administration and the City Council to lower waste disposal costs over the short and long-term.