Babylon looking to cut trash pickup fees

After years of paying more than twice as much as other towns for trash collection, Babylon is preparing to shed a 20-year-old contract for residential garbage pickup.

The town is paying more than $27 per household as a result of a contract extension signed in 1992 that mandated annual 3 percent increases. By comparison, towns with similar service such as Huntington and Brookhaven pay $10 to $13 per household.

The contract with Babylon Source Separation Inc. expires in October. Babylon officials said they will begin the bid process this week and hope to sign a new 10-year contract for less than $15 per household.

"The contract's been an albatross around our neck for years," said Doug Jacob, a consultant and former town comptroller whose company, Red Hill, provides the town with employees for garbage-related work. "We have been paying above-market fees based on a contract we inherited."

Chance to save money

Town Supervisor Richard Schaffer, whose first term as supervisor began just after the extension was signed, called the request for bids a "major opportunity for us to save a lot of money on behalf of the taxpayers."

Steve Bellone, who followed Schaffer as supervisor in 2002 and served until he was elected in November as Suffolk County executive, did not return calls for comment.

No current town official was involved in the 1992 negotiations, which came after most landfills on Long Island were ordered closed because of groundwater pollution. Tom Melito, deputy supervisor at the time and now a town consultant, said that as towns struggled to find places to dispose of waste, carters' negotiating position became stronger and municipalities had to meet their demands.

Then-Babylon Supervisor Arthur Pitts said the town was searching for "some sort of stability" in pricing.

Town officials called Babylon Source Separation's level of service "tremendous" and Schaffer said that, over the years, the town informally discussed a contract extension beyond 2012 but that the company could never lower its rate far enough. More formal negotiations between the company and the town broke down last year over pricing.

Bob Marx, president of Romar Refuse, one of 10 subcontractors that make up Babylon Source Separation, said the company's rates reflect its "Cadillac" service -- referring to frequency and variety of pickups -- and cannot be offered for what the town is seeking from bidders. Matt Fenster, president of Babylon Source Separation, said the company is likely to bid for the contract.

William "Matt" Groh, a Republican town board candidate last year, has said that even given those high rates Babylon has been overcharging residents for years for garbage collection, allowing the town to build a surplus that has hovered around $30 million since 2008. The town used this surplus on tax cuts each of the past two years.

'False' tax cut charge

Groh has called that a "false" tax cut created by the overcharging. He points to a 2009 state comptroller's report that criticized the town for an excessive surplus in its garbage fund and noted Babylon was "overstating its need for garbage fees" and not returning enough fund balance "to the taxpayers."

Schaffer, town supervisor from 1992 to 2001 and appointed to the position again this month, called Groh's accusation a "nonsensical political diatribe coming from a failed and rejected candidate."

Budget figures show part of Babylon's 2010 garbage revenue included $29.5 million from residential taxes; payments for garbage collection included $15.3 million to Babylon Source Separation and $17.8 million to Covanta for its garbage-burning West Babylon plant.

Jacob said that while the town increased garbage taxes three times in the past 11 years, it built its surplus not through taxes but by finding additional revenue.

From 2005 to 2006, for instance, the town said the garbage surplus increased from $14.7 million to $20.5 million because of an extra $2.3 million from LIPA in energy credits, $1.5 million less in expenses at Covanta, $1 million in unused legal expenses from the settlement of garbage-related lawsuits, and $1.3 million in "under-budgeted" interest.

Jacob said Babylon needed to improve its fund balances more than a decade ago -- in 1998 Moody's Investment Services Inc. issued a "negative outlook" for Babylon and downgraded the town's bond rating to Baa3, the lowest of its 10 investment grades -- while adhering to Bellone's policy of not taking on more debt than the town retired each year. The town's current bond rating is Aa2, the third-highest.

Jacob added the town prefers to use garbage fund money rather than issue bonds for garbage-related capital projects, such as expanding the town's ashfill. Babylon officials say they plan to use the remaining surplus toward $36 million in garbage-related capital projects over the next few years.Asked about Babylon's accumulation and use of the surplus, state comptroller spokesman Eric Sumberg said the 2009 report found "the town was on solid financial ground" and that "Babylon's fiscal position had improved significantly over the past decade."