Landfill Manager’s Notebook: Recession Economics 101

Landfills across the country are feeling the effect of our struggling economy. While much of the wastestream is still flowing, some components are definitely drying up.

Based on the current pinch points in the economy, we can generally predict the eventual impact on waste flow. New construction projects have been stalled for some time, and those that were already in the pipeline are winding down. So it’s no surprise that C&D tonnages are way down.

Similarly, as sales of durable goods and consumable products slow, less trash is generated. A thumbnail survey of landfills across the country indicates a 10%–15% drop in waste tonnage, with some facilities showing much wider variation.

Many of a landfill’s costs are fixed. The cost of your liner, environmental monitoring systems, tractors, and (to some extent) your staff, are relatively fixed. In many cases, especially for small and midsize landfills, it’s just not possible to make a 10%–15% cut across the board. The machines you used when handling 600 tons per day are the same ones you still need to process the 480 tons you now receive—same cost, just less revenue.

From an economic standpoint, decreasing revenue and static costs are not ingredients for business stability. No question, many landfills are feeling the pressure of a down economy. But like most other things, the economy is cyclical. Things will change, and the economy will again build steam and start moving. Bottom line: For many landfills, it’s just a matter of how long it will take and how to survive until things improve.

Every landfill’s budget is based on short-term and long-term expenses. In tough economic times, managers may have to borrow against the future. The first rule of planning for the future is surviving long enough to get there.

An example of a short-term expense is your fuel bill. If you don’t pay your fuel supplier, you won’t be working next month. Same concept applies to payroll, utility bills, and so on.

Machine maintenance is not quite as short-term, but if you start skimping on basic services and repairs, you’ll be paying for it within a few months. In terms of borrowing against the future, we need to focus on something that’s a bit further out.

Postponing machine replacement is one way to provide some short-term economic relief. In many cases, machine replacement decisions are made a year or more in advance. In some cases, equipment replacement funds began building when you bought your previous machine. So what would happen if you kept that old machine for another year or two? Perhaps it would require more repairs, maybe even an engine or undercarriage rebuild. “Hold on,” I can already hear you saying, “in the long run, it will be cheaper to replace that old machine.” True—but we’re focusing on keeping our budget afloat in the short-term. I’d venture a guess that if you decided to postpone the purchase of a new machine, you could use that money to help support other critical areas within your budget.

When things are good and revenues exceed expenses, there is often little incentive to cut costs. But when the economic picture flips upside down, cutting costs is no longer an option—it’s a survival skill.

If your landfill is feeling the pinch of declining revenue, now is the time to step back and re-evaluate the system. Get key players from your team involved, including people from finance, planning, maintenance, and compliance. Don’t forget to talk with your crewmembers. They know what’s going on and may have ideas you haven’t considered.

Look closely at your budget and aggressively examine every major expense, even if it’s planned and even if it’s in the budget. Things could get worse before they get better, and by next year that machine you just had to have could be an economic ball and chain. The Federal Reserve has published models showing our economy improving in 2009 and 2010…but wisdom would suggest a conservative view.

A few years ago, I had the opportunity to conduct operational reviews of 28 small, arid landfills in Kansas. These are landfills that receive less than 20 tons of waste per day, but they still need basic equipment to do the job. Most had loaders or dozers for handling the waste, and several had small compactors. These operators had many of the same responsibilities of their high-tonnage counterparts, with significantly less revenue. In some cases, these facilities operated on a fraction of the cost that most landfill managers would consider possible. How do they do it? Almost without exception, they do it very well. And they do it because they have to: Additional money is simply not available.

So they revert to hard work and ingenuity, requiring their machines and staff to multitask. Every economic decision is run through the is-it-really-necessary? gauntlet.

Every landfill operation accumulates some fat during the good times. It may not be intentional, but it happens. When times are tough, those areas need to be trimmed back. If your landfill is feeling the pinch, don’t waste time complaining about it. Step back and re-evaluate. Start with those big budget items and work your way down. What you learn during the tough times can help you survive today and be even more competitive in the future.