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Courtesy, Waste Management
New franchise agreements would require companies to upgrade a certain percentage to CNG, like this Waste Management truck, in the Los Angeles market.
A major overhaul to the way waste and recycling is collected for commercial and multifamily customers is coming to the nation's second largest city.
The Los Angeles City Council voted to move forward with a plan to break the city into 11 franchise districts with an exclusive private hauler servicing each area. Each district would be up for bid, and the city will select the hauler, according to the proposal.
The implementation of the plan will be slow, with a committee report due back to the City Council by mid-February on the proposed rules for the franchise agreements. The districts must be bid out individually and that process will likely take several years because of various reporting requirements, city officials said.
Currently, the city picks up waste and recycling for single-family homes and a number of private haulers collect for commercial and multifamily properties. Those businesses and apartments can independently contract for service.
City officials and the Sanitation Bureau pushed forward the measure to reduce the number of trucks on the road and to collect recycling in a more unified and efficient way. The city has a zero waste goal, defined as 90% diversion, by 2025.
"It's an aggressive goal and that doesn't mean that it's unattainable," said Andrea Alarcon, president of the Los Angeles Board of Public Works. "We've done everything that we can do that is voluntarily. I liken it to dieting: the first 10 pounds are easy, the last 10 pounds are tough."
The city has an overall recycling rate of approximately 65%, but commercial recycling is above 75%.
Various business groups spoke out against the plan, including the Los Angeles County Disposal Association, saying the reduced everyday competition will raise prices for businesses and apartments, and the measure will likely squeeze out small haulers.
"At the end of the day, what's left for any of the small- or medium-sized guys in any exclusive plan is nothing, really," said Ron Saldana, executive director of the organization.
He said non-exclusive franchise agreements could bring about the same changes the city wants but wouldn't break the city into districts and force smaller haulers out of the picture.
Alarcon said the exclusive franchise agreements would be 10-year contracts with two five-year renewal options with mandatory mid-term assessments and annual service reviews.
"There was some talk that there were hundreds of haulers and we would be putting hundreds of haulers out of business, but that's not true," Alarcon said in response.
There are 45 haulers permitted to collect commercial or multifamily waste in the city, with only 26 collecting more than 1,000 tons of waste annually, she said. The seven-year average indicates the market is worth $215 million and 10 haulers control 90% of the market, with Republic Services Inc. controlling 35% of the entire market.
The other largest players include Athens Services at 23% of the market, Waste Management Inc. at 19% of the market and Crown Disposal at 10% of the market.
There are a number of details to be worked out by the Sanitation Bureau and city committees that include finding a place for smaller haulers, she said. One of the suggestions is a provision to allow for subcontracting in the districts or having a district designed specifically for small haulers.
Saldana said he believes there are more than 45 haulers working the city and the exclusive franchise agreements are a way for new companies to easily jump into the city as well.
"I'm sure there are a number of large haulers that don't operate in the city of Los Angeles that are probably eying this," he said. "They are probably salivating because this is their opportunity to jump in."
Among the other details to be worked out in committee: provisions to limit the number of districts a single hauler could control; mandating new trucks be fueled by CNG or another clean fuel; the specific fee for approved franchises; mandating specific types of recycling for customers; exemptions for medical waste and C&D debris; specific worker health and safety requirements; and waste diversion requirements.
"I really think that 95% of what we're talking about and what they're talking about are on the same page. The only difference is the exclusive or nonexclusive [franchises]," Saldana said.
The measure passed easily by the City Council, 11-3.
"The bottom line is that we know without a shadow of a doubt that our waste system is in need of an overhaul," said city council member Paul Koretz.
He said the exclusive franchise system would help with traffic, air quality and potential street damage from so many trucks on the road.
"We know that these multiple trips destroy our roads," he said.
Council member Jan Perry spoke out against the measure.
"I believe it would put small waste hauling businesses at a competitive disadvantage, many of whom are third and fourth generation," she said.
Alarcon dismissed the notion that competition will be lost and prices will go up for consumers.
"The value of the asset in the exclusive system is high," she said. "That is going to drive the proposers, the haulers, particularly those currently active in our market, to fight for that asset. A 10-year, exclusive right to a significant portion of the Los Angeles market, a $215 million market, is valuable. They will fight and that will drive down the prices."
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