Talking Trash

On Monday evening, Tim Bakels announced that the Club would outsource waste and recycling services to Pro Disposal/American Pride Waste Solutions, effective January 2, 2023. The announcement stated that the price of the service would remain unchanged, but trash collection would occur once per week rather than twice, as is now the case. Not to go all economist on you, but paying the same and receiving less is equivalent to paying more and getting the same. The outsourced deal would be a worse value for the Owners than they currently receive. Of course, the current service may be underpriced and outsourcing the service simply revealed that the Club had been subsidizing trash collection (a similar event may be occurring as some Owners who had previously used the Club for landscaping services discover that their costs may be increasing). In my view, subsidies are bad and revealing subsidies is one of the benefits of outsourcing. 

Just as a reminder, the cost of the trash service is currently $171 per quarter. If one were to assume that 350 homes use this service, the annual revenue to the Club would be about $240,000 per year. In exchange for this, the Club makes about 36,000 trips to our service yards each year, as well as picking up yard waste once per week. I always felt that the charges were reasonable and the service was outstanding. In exchange for the $240,000 of revenue, the Club employs the hardest working man in the Club to do the work (maybe $80,000 per year (including benefits)?), plus the Club pays for vehicles to carry the waste, and hires a third party to transport the waste off site for disposal. Hard to see how the Club makes much money by offering this service--outsourcing may well make sense. 

Apparently there was negative feedback from the Owners, because yesterday evening, Tim announced that implementation of the outsourcing had been "postponed indefinitely" as the Club considered its options. This raises a couple of questions: 

(1)     Had the Club signed a contract with Pro Disposal/American Pride Waste Solutions?

(2)     If so, is there a termination fee or other payment due to Pro Disposal/American Pride Waste Solutions if the Club doesn't use them?

(3)    If no contract was executed, wasn't the 12/19 announcement premature?

(4)    The original announcement stated that the Owners would be provided with two new trash cans for use with Pro Disposal/American Pride Waste Solutions. Have those trash cans been purchased? Given that the new service was set to start in two weeks, it seems likely that those containers would have already been purchased--but maybe not. What will happen to those trash cans?

I favor outsourcing whenever possible. Perhaps the most important aspect of outsourcing is that it reveals the true cost of a service. But for outsourcing to make sense, you need to drive all of the costs associated with the outsourced service out of our cost structure. Perhaps the Board will let us know whether that's being done.

The Board proudly announced at a recent meeting that it hadn't even considered outsourcing food and beverage. It's not clear how not even considering this alternative is consistent with the Board's duty of care under South Carolina law, but they say they haven't. Now that we're on an outsourcing roll, maybe we'll revisit this issue, as well. First, we outsource home landscaping. Now we're considering outsourcing trash collection. Can considering outsourcing both F&B and management be far behind? I wonder what the Owners think?