Double-Digit Rate Hike Proposed for Garbage Collection

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Trash is likely to get more expensive. Photo: Helena Chiu

Last February, Recology, the private company that provides the City with garbage services, applied for a rate increase from the San Francisco Department of Public Works. Recology’s San Francisco operations consist of collectors Recology Golden Gate and Recology Sunset Scavenger, and refuse processer Recology San Francisco. The City has the authority to determine the residential – but not commercial – rates charged by Recology, which last requested, and obtained, a 22 percent rate hike in 2013.

The 2017 proposal, if approved, will raise residential collection rates through 2020, with a 16.4 percent jump in the first year, beginning July 1, 2017; 4.98 percent hike in the second year; no change in the third year; and a 0.62 percent rise in the fourth year. The new rates would generate roughly an additional $220 million in revenue for Recology over the four-years. Recology’s San Francisco collection subsidiaries currently generate $264 million in annual revenue, earning roughly a 9.5 percent profit. 

According to Recology, a typical San Francisco household presently pays $35.18 a month for weekly collection of three 32-gallon bins: trash, recycling, and compost. In 2020, that same household would pay $42.95 monthly for the service. By comparison, a single-family residence in San Jose spends $36.83 per month for weekly collection of garbage, recycling, and yard trimmings from bins of the same size; equivalent service in Oakland costs $40.60.

Over the past several months, DPW director Mohammed Nuru has held seven public hearings at City Hall, with testimony by Recology representatives, cross-examination by municipal officials, and public comment. Public Works also hired an independent “ratepayer advocate,” RDJ Enterprises, which is supposed to educate, engage, and represent San Franciscans during the public process.  Residents can call or email RDJ to obtain an explanation of the proposed rate changes or voice their concerns.

In its rate increase application, the company noted that its largest expense is labor; workers’ salaries and benefits account for 65 percent of total costs.  In 2018, that amount is “projected to increase by 9.5 percent based on the collective bargaining agreement recently negotiated with Teamsters Local 350.”

Primarily, however, the application focuses on funding infrastructure upgrades that’ll help the City achieve its waste reduction targets. One of these improvements has already been completed: the new $11.3-million sort-line at Recycle Central at Pier 96, which has increased the system’s capacity by 14.5 percent and enabled “the recovery of additional material not previously diverted, such as aseptic containers, gable-topped cartons, bagged textiles, bagged film plastic, small pieces of metal, and unpainted wood.” Recology has covered $9.2 million of enhancement costs; the company proposes to pay off the remaining balance using incentive funds that were set aside during the 2013 rate increase application process to spur the company to meet San Francisco’s environmental goals.

A new composting facility, intended to replace the Organics Annex that opened in 2007 on Tunnel Avenue, is being planned.  According to Recology vice president Mark Arsenault, the existing 7,500-square-foot space “is not only too small for the 600-plus tons of compostables that we move through that little building every day, but it is virtually rotting under the heavy acidity of the nature of the compostables. It is not able to adequately contain the moisture that is very prevalent in organic material, as well as odor, and actually can’t be completely enclosed, so there are a number of issues with that building.”

The proposed facility would be called the “West Wing,” a name owing to its initial conception as a Tunnel Avenue extension project.  Construction delays on that effort served to reveal the need for an entirely new structure; specifically, a 14,546-square-foot composting center with a “large tip floor” and a “state-of-the-art odor management system.” Recology wants to start construction this summer, and open the West Wing in September, 2018, at a total cost of $18,857,170.

Also planned is a citywide bin swap for residents who subscribe to Recology’s “default service.” The most common single-family disposal arrangement currently consists of three 32-gallon bins. Recology believes that as residents produce less trash and recycle more the black bin can shrink from 32 to 16 gallons, and the blue bin will need to grow from 32 to 64 gallons. Arsenault attributes much of the steady volumetric rise in recycling in recent years to the prevalence of online shopping, which contributes “all that cardboard that seems to be in the stream.” Residents who prefer equal-sized bins can request to keep their existing configuration; others would be given new black and blue bins. Both sets of customers would pay the same rates.

Apartment buildings, however, would see a change in the way their “diversion discount” is calculated. The discount program was initiated in 2013 to reward dwellings containing six units or more for diverting waste from landfills by recycling and composting at a higher rate.  Apartments had to maintain a “diversion rate” greater than 10 percent to qualify for a discount. Starting in July, more than 25 percent of a building’s waste would need to be recycled or composted for discount eligibility. The discount would be applied to Recology’s rates for apartments by determining the volumetric percentage of blue- and green-bin refuse within the building’s total output and then subtracting 25 percent – as opposed to 10 percent previously. A building that diverts 75 percent of its waste, therefore, would receive a discount of 50 percent instead of the 65 percent discount it gets under current rules.

The new system would, however, remove the discount “cap” that, under 2013 terms, stripped apartment buildings of a financial incentive to divert at a rate higher than 85 percent. Recology notes that apartment buildings constitute “one of the lowest-performing sectors for diversion.” The company hopes to ameliorate that with a new Apartment Diversion Program, intended to “increase tenant engagement” through social media campaigns, delivery of composting pails, and installation of “Waste Zero Ambassadors” at targeted buildings, who would be “responsible for motivating their neighbors to sort properly.”

“We are excited to continue working with the City towards our mutual goal of zero waste,” Arsenault affirmed. In 2002, the City declared a bold ambition to achieve “zero waste” by 2020, meaning that, if all went well, San Francisco would send no trash to landfill or the incinerator by the start of the new millennium’s third decade. A 75 percent diversion rate was obtained in 2010, helping to establish San Francisco as one of the world’s greenest cities.  According to the New York Times, the Pier 96 recycling center “achieved something approaching celebrity status, with numerous write-ups” and “visits from some 50 film crews.”

In recent years, however, the diversion rate has stalled at about 80 percent.  At a March Director’s Hearing Arsenault admitted that “the technology of dealing with . . . those last few steps toward zero waste” has “not yet been solved.” In a 2014 FiveThirtyEight interview, San Francisco’s Zero Waste program manager Robert Haley acknowledged, “It would be hard for me with a straight face to say, ‘In six years, nothing is going to go to the landfill.’ But we want to get as close as we can to that.”

Today, San Francisco directs 1,100 tons of garbage to a Solano County landfill daily, much of it owing to the construction boom, which is responsible for sending 600 tons of building and demolition debris per day to Recology’s Integrated Materials Recovery Facility (iMRF), whose diversion rate is only 51 percent. Recology’s application includes “a contingent schedule for development of a new iMRF,” which, if pursued, would cost an estimated $63.4 million, with construction beginning in June, 2018, and finishing in December, 2019. The facility would add 600 tons a day of incoming capacity, with a projected diversion rate of 70 percent. The old iMRF facility, then, would – according to a second “contingent schedule” – be used to house a new “trash processing system” that’d “capture additional recoverable material” from the residential and commercial black-bin waste streams, 50 percent of which may, according to recent studies, consist of refuse that should have been deposited into a blue or green bin.

Costs for the two contingent projects “are not included in the base rate application,” as their design and permitting processes have not yet been completed. Under the terms of the rate increase application, however, Recology would have the right to put the contingent rate schedules into effect upon the DPW director’s approval of final plans for the new iMRF and trash processing system, triggering additional rate hikes of 1.47 percent and 2.78 percent, respectively.

Recology emerged as the result of a 1932 Refuse Collection and Disposal Initiative Ordinance, which, in an effort to end turf wars among a multitude of independent trash collectors, divided San Francisco into 97 garbage collection districts, a permit – with no expiration date – for each district. Eventually, the company that’d become Recology acquired all 97 territorial permits, forming a monopoly. A 2012 ballot initiative to restore competitive bidding for municipal trash collection failed. Recology doesn’t hold a City contract in the traditional sense; since the City controls what it can charge residences, the residential refuse rate application process creates a measure of public accountability.

Commercial rates are likewise expected to rise in 2017; according to a friendly agreement, the City also participates in Recology’s commercial rate-setting process, but the 1932 ordinance doesn’t demand the same public disclosure and engagement that mark the residential application procedure.

During the public comment portion at a March Director’s Hearing, a concerned citizen opined that Recology’s public outreach to residents had been inadequate, observing that the rate increase proposal letter sent to San Francisco homes “looks like junk mail, and people are throwing it out, and they don’t know. There could be an email; there also could be other notices on our bills; there are many other avenues to let people know.”

Following the final public hearing,  from 9 to 11 a.m. May 4, at City Hall, Room 416, the DPW director will send his findings to the City’s Refuse Rate Board, a panel consisting of the Public Utilities Commission general manager, City Controller, and City Administrator. After hearing any public objections to the director’s report, the Refuse Rate Board will render its final decision on Recology’s rate increase application before the end of June.