LA Businesses, Landlords Trashed … Mayor and City Council Sending Wrong Message

LA WATCHDOG

LA WATCHDOG--The rollout of the City’s Commercial Waste Exclusive Franchise System has caused sticker shock to many businesses, multi-family buildings, and homeowner associations as they have been bushwhacked by rates that in “many instances ….. have doubled, tripled, and even quadrupled, with the inclusion of new fee assessments that did not exist under the previous private hauler agreements” according to a letter sent by Councilmember Mike Bonin to Councilwoman Nury Martinez, the Chair of the Energy, Climate Change, and Environmental Justice Committee of the Los Angeles City Council. 

This is in sharp contrast to the “modest” rate increases promised over the last five years by Mayor Villaraigosa, Mayor Garcetti, Councilmembers Huizar, Krekorian, and Koretz and the rest of the City Council, the Los Angeles Alliance for a New Economy, and other proponents of this new environmental initiative that was to result in greater economies of scale and efficiencies that would help to offset increased costs.     

Under this new so called public private partnership and the City’s Zero Waste Initiative, the City awarded 11 exclusive franchises to seven private companies with the goal of diverting 90% of our trash from landfills through “pioneering” waste reduction, reuse, recycling and recovery programs. 

Under this new program, the seven franchise service providers are anticipating annual revenues of $350 million, an increase of 56% ($125 million) from the current level of $225 million.  

Underlying this not so modest bump in rates are four factors. 

Under these new ten year agreements, franchise service providers are required to use clean-fuel burning trucks that are considerably more expensive than the diesel fueled trucks that are currently being used by the existing haulers.  

Franchise service providers are also required to pay a living wage which is higher than the current compensation levels.  There are also other city requirements and work rules that will increase the cost of service. There is also the likelihood of increased unionization and higher wage demands. 

The 80,000 businesses and multi-family buildings that will be subjected to this new arrangement will be also be hit up for $16 million this year and an estimated $35 million next year to fund Sanitation’s new department that will consist of more than 70 employees to oversee the new franchise arrangement.  In all likelihood, a significant portion of this new revenue will be diverted, directly or indirectly, to the City’s General Fund to help pay for the higher personnel costs associated with the new labor contracts for the police and civilian unions. 

Finally, under the exclusive franchise arrangement, rates are determined in a monopolistic environment controlled by the City and Franchise Service Providers.  Under this system, fees and assessments are not subject to market forces.  The economies of scale and anticipated efficiencies do not appear to have benefitted the businesses and multi-family buildings, but rather captured by the franchise service providers.    

This is opposed to a non-exclusive franchise system recommended in 2012 by Miguel Santana, the former City Administrative Officer, where rates, fee assessments, and service levels would be subject to competition and market forces, all the while achieving the same environmental goals and efficiencies.  

According to Bonin, the “program’s implementation has been seriously flawed, and is proving to be as unpopular as the botched rollout of the new billing system at the Department of Water and Power.” 

But even more than the flawed rollout of the Exclusive Trash Franchise System is the business unfriendly message that Garcetti and the City Council are sending to employers and investors that they are sitting ducks for future fee and tax increases, the hell with the consequences on new jobs and investment that will help our economy and Angelenos prosper.

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  He can be reached at:  lajack@gmail.com.)

-cw 

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