A GUIDE TO FIGHT FLOW CONTROL

Published by Recyclers for Competition

Illustrations: Nancy Gorrell

Copy Edited By: Mary Lou van Deventer, Urban Ore

All articles published with author's permission

Contributors:

Ruth Abbe	Northern California Recycling Association
Rick Best	Californians Against Waste
Joan Edwards	J. Edwards & Associates
Judi Gregory	Global Waste Recycling
Pandee Leachman	Assn. Of California Recycling Industries
Gary Liss	Gary Liss & Associates
John Douglas Moore	Henn, Etzel & Moore

What Flow Control Is

"Flow Control" means controlling how post-consumer resources - garbage or recyclables - are collected, who can collect them, or where they are allowed to go for processing. This paper is concerned only with control of recyclables.

Recyclers for Competition is a confederation of recyclers who believe monopoly control over the flow of discarded resources is contrary to the best interests of the public and the planet.

To join us, contact John Moore, Henn, Etzel & Moore, 1970 Broadway, Suite 950, Oakland, CA 94612, phone 510-893-6300, fax 510-433-1298, email jmoore@recyclelaw.com.

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GUIDE TO FIGHTING FLOW CONTROL
And Protecting A Competitive Recycling Industry

CONTENTS

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Introduction to Flow Control
By, Joan Edwards, J Edwards & Associates

Why this booklet?

This booklet is meant to be read by everyone with a stake in helping to create cost-effective diversion programs that meet the goals of AB939 and beyond. We hope that there is something here of interest and benefit to all stakeholders - municipal employees responsible for AB939 compliance, regulatory agencies, elected officials, business waste generators, haulers and independent recyclers, environmental activists, and, of course, the general public, which both participates in and ultimately pays for the programs implemented in the wake of AB939.

Two factors prompted the creation of this document. First, that one of the unintended consequences of AB939 was to encourage more localities to use flow control and franchise mechanisms as a means of AB939 compliance. Second, that the increasing use of flow control and franchise mechanisms for recycling purposes has unnecessarily increased recycling costs, while stifling creativity and the development of new and cost-effective recycling strategies. As important, it has reduced competition for recycling services at a time by limiting input by the very industries which have the most experience in recycling - independent recyclers who have no financial stake in waste disposal facilities.

The document has three primary goals: 1) To help readers understand the history and ongoing development of flow control regulations and their impact on a competitive recycling industry; 2) To point out the problems caused by restrictions on recycling businesses and the value of competition to maximizing diversion in California; and, 3) to encourage an ongoing dialogue about beneficial alternatives to flow control of recycling activities throughout California. It is meant both as a stand alone document, to stimulate discussion and encourage productive changes in municipal and regional recycling policies and in conjunction with supplementary information that helps individuals and organizations change restrictive flow control policies.

The authors recognize that residential recycling strategies, to be successful, may require some unique consolidation of services that restrict competion in order to create cost-effective economies of scale. Similarly, we understand that the unique health issues related to transport and processing of raw refuse require some local and state regulation. The focus of the information and recommendations contained in this document are therefore on recycling collection services to commercial, industrial and institutional waste generators and on development of recycling facilities serving both the residential and commercial sectors.

Cost effective recycling

There are alternatives to restrictive public policies strategies which deprive residents, businesses and institutions from using cost-effective recycling services by independent recyclers. Many are described in the following pages and many more are undoubtedly possible, each adapted to the unique characteristics of a locality and its inhabitants. In particular, we encourage use of "fee for service" recycling services, which can save individual businesses and institutions thousands of dollars, in many cases over a hundred thousand dollars, each year. This is particularly important as we move toward higher diversion goals, target less valuable recyclables, or commingle several recyclables in one vehicle as a way of reducing collection costs. The latter can make recycling easier for many generators and reduce the storage area needed for these materials prior to pickup by a collction vehicle. Included in the discussion of alternatives are suggestions for addressing the types of concerns which have led many localities to consider restricting access to recycling services. We have made an effort to show that there are many strategies which can be compatible with a locality's other solid waste management, revenue, and oversight goals.

Collection of recyclables from municipal agencies

Municipalities often obtain "free" collection services under franchise agreements. Not only are these services not truly "free" (since the costs are absorbed by residential and commercial ratepayers), but they also negatively impact on decisions to recycle from this waste stream. This is particularly true of public works refuse which can often be recycled at a fee which is lower than the cost of refuse collection in a competitive environment.

Fee setting as a means of limiting competition for recycling services

There is clearly a trend toward imposition of additional franchise and permit fees for waste haulers and recyclers. While collection of fees may be appropriate to cover legitimate costs of municipal services, fees can also be used in a non-exclusive franchise or permit system to protect private waste haulers or municipal public works employees from competition by independent recyclers or to defray municipal costs not related to waste management services. It is very important that consumers demand accountability from municipal agencies imposing these fee and permit systems.

Background

Independent recyclers have long accounted for the majority of material recycled in the United States, particularly in the commercial and industrial sectors. Yet, as noted in previous portions of this publication, many communities in California and elsewhere have chosen to control the flow of waste and recyclables through requiring materials to flow to a designated facility or by limiting the collection of materials to a franchised waste hauler, including those collected through "fee for service".

Local governments do not have to implement flow control to meet the requirements of AB939, nor to maintain their revenue requirements. They have a wide variety of other options, many of which are being pursued around the country. In fact, the 1995 USEPA Report of Congress on Flow Control and Municipal Solid Waste found that "less than 3 percent of the recycling market is subject to flow control…There are no data showing that flow controls are essential either for the development of new solid waste capacity or for the long term achievement of State and local goals for source reduction, reuse and recycling."

The importance of independent recyclers and encouraging entrepeneurial recycling activity is further seen when evaluating AB939 reports by local governments. The "baseline diversion" shown initially and carried forward in annual reports, combined with new open competitive activities, are quite substantial, especially when compared with new recycling diversion initiatives linked to flow control efforts. Cost comparisons are also instructive, with major savings frequently shown when some form of competition is encouraged.

Decisions by local governments to restrict competition for solid waste and recycling services are made for many different reasons. Sometimes it is seen as a way to protect the health and welfare of its residents, especially in the case of mixed refuse. Franchising is often seen as a way to collect revenue for the local government, through imposition of a negotiated franchise fee, or to otherwise cover costs in an increasingly tight municipal budget. In many instances, localities are negotiating "free" collection of waste generated by government agencies as part of the franchise agreement, thus taking the cost of that item out of the general municipal budget and including it in residential and commercial refuse rates. Ironically, this "free disposal" serves as a serious disincentive to recycling by municipal agencies, despite the fact that refuse directly generated by municipal operations can often account for 10% or more of the commercial waste stream. Businesses and residences must then divert even more materials to make up for the lack of recycling by municipal agencies.

After passage of AB939, many local government representatives, unfamiliar with the existing recycling infrastructure and fearful of the potential for fines, provided increasing control of the waste stream to a single waste hauler in return for promises to achieve designated diversion rates. Localities also decided to underwrite new facilities through bond issues and agreements to direct waste and/or recyclables to these facilities, regardless of opportunities to use less expensive facilities elsewhere. This last example is probably best known through the many publicized examples of waste-to-energy facilities built throughout the U.S. since 1980. Finally, there is often concern that "sham recycling" will be used as a cover to illegally collect refuse in a locality where collection of solid waste is handled by a single franchised waste hauler.

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THE LAW OF FLOW CONTROL

*© 1997 John Douglas Moore, Law offices of Stone and Moore
The law permitting government to regulate the collection and disposal of recyclables and solid waste, sometimes called flow control is not singular. It is multi-layered, like an onion. The core consists of legislation and resolutions adopted locally by the city or county which authorize and implement flow control.

The outer layers of the onion are: (1) state law as interpreted by the courts; (2) federal law; and (3) constitutional law. Each outer layer can, under proper circumstances, overrule or trump any of the inner levels around which it is wrapped.

For example, the California Supreme Court has held that the maximum scope of an exclusive franchise is the collection of solid waste which the Court defined to mean material that a generator pays to have taken away (fee for service). State law clearly does not require government to grant any exclusive franchise for solid waste collection; exclusive franchising is just one tool that government may employ.

Any local franchise agreement or solid waste ordinance in conflict with these state law parameters is likely to be unenforceable. These state law parameters may be proscribed further by federal law and constitution.
This chapter examines only the law generally applicable to California collectors, sorters, processors, and end users of recyclable material generated in California.

LOCAL LAW

In reviewing the applicable law in any local jurisdiction the best starting point is the franchise agreement orother device used by the public entity. The franchise agreement will likely state the scope or grant of the franchise. Outside the scope of the franchise grant, independent recyclers may collect materials without any conflict between this activity and the franchise agreement. A franchise agreement may cover only specified material or it may only apply to certain sectors (i.e. residential collection) or it may have other qualifying factors that permit competitive collection activity. The franchise agreement is a contract and its breach is governed by contract and tort law principles not addressed here. Often, the franchisee asks local government to enforce the franchise against competing non-franchisees.

The franchise agreement is typically coupled with legislation found in the city or county code whereby the public entity establishes its right to franchise, the scope of the permissible franchise, the requirement, if any, of mandatory collection by the franchisee, the material which may be the subject of an exclusive franchise, the specifications of any curbside collection programs and definitions of terms used such as "solid waste", "garbage", or their constituent materials. It is not uncommon for the ordinance to read inconsistently with the franchise agreement, which also creates enforcement difficulties.

STATE LAW

AB 939i grants local government the primary responsibility for adopting and implementing solid waste and recycling legislation subject to state-imposed limitations.2

The most important flow control limitation found in AB 939 is the maximum-permissible grant of an exclusive franchise. Under state law, local government may only, but does not have to, grant an exclusive franchise for "solid waste handling services".3 The grant of this exclusive franchise need not be by competitive bid, but must be supported by legislative findings that the "public health, safety, and well-being" require an exclusive franchise.4

The state law definition of "solid waste"5 (which is collected by the franchisee providing "handling service") was interpreted by the California Supreme Court in the case commonly known as the Rancho Mirage6 decision.

The Supreme Court held that solid waste which can be exclusively franchised is material which is "discarded".7 In contrast, material that is "disposed" for compensation is not solid waste.8 Under state law, the maximum permissible exclusive solid waste franchise covers only materials that are "discarded".

The Court defined "discard" to mean "throw away" using the American Heritage Dictionary definition of that term (which also makes it synonymous with "reject").9 The Court then applied its own illustration of "throwing away" by finding that if an owner/generator pays a fee for the collection service for the material, the material is "discarded" and is "solid waste" subject to the maximum exclusive franchise.10 Conversely, if the owner/generator sells the material, it is "disposing" of the material, not discarding it, so that the material is not solid waste.11

If the owner/generator gives away the material, the Court was less than clear whether the material is solid waste or not. Both recyclers and franchised garbage haulers can point to illustrations used by the Court to support the view either that material given away or donated is solid waste or not.12

Many recyclers initially interpreted the Supreme Court's decision to mean that a generator could establish the materials' value - and hence that it is not solid waste - by lower collection cost charged by a recycler or by the societal value of recycling material to avoid the environmental consequences of landfill disposal, incineration, or depletion of virgin resources.

In this author's view this interpretation was inconsistent with the Supreme Court's bright line test of fee for service. A later California Court of Appeal decision faced with these competing arguments rejected the recyclers' viewpoint and upheld the Supreme Court's bright line fee for service test.13

While there are legitimate reasons to contend legally that the Supreme Court misinterpreted AB 939 and defined "solid waste" too broadly -- because it includes so-called "negative value" materials which are, in fact, recycled, this high court has firmly entrenched the definition of solid waste to mean materials that are collected for a fee (and possibly given away). Last year the Supreme Court was presented with a case which would have allowed it to revisit or reconsider its Rancho Mirage interpretation and the Court chose not to accept the case for hearing.14 Today, any reinterpretation of the definition of "solid waste" must come either from the California State Legislature or by statewide voter initiative, or from a federal body with the ability to "trump" the Supreme Court's interpretation.

There are numerous other California state laws which also impact flow control and are deserving of brief mention:

1. CEQA

Any change to a franchise agreement, local government ordinance or the implementation of either, which has a potential significant adverse environmental impact, triggers the application of California's Environmental Quality Act (CEQA).15 Since the California State Legislature has found there to be detriment to the environment by landfill disposal and incineration16 any possible increase to landfill disposal and incineration by virtue of a change of local government action, probably constitutes a "project" which requires the publication of an environmental impact report detailing the environmental impacts before any local government change may be implemented.

Although this premise has not yet been tested in a California Court of Appeal, this author has had considerable success in persuading local government that CEQA must be complied with under these circumstances.

CEQA requires public reporting of all factors which potentially create significant adverse environmental impact.17

2. Nuisance laws

AB 939 explicitly states that local government may protect the health and welfare of its citizenry by regulation.18 Simply stated, the same local legislation that prevents a produce market from throwing its rotting vegetables out into the street also prohibits mishandling of any recyclable material in ways that are detrimental to health and safety. The fact that these health and safety laws exist and that AB 939 clearly permits them, proves that exclusive franchising is not necessary to protect public health and safety. In fact, the opposite is true: so long as local government can protect health and safety by less restrictive means than a monopolization of recyclables, which arevaluable commodities, it is difficult for government to find a necessity for the grant of a broad exclusive franchise covering recyclables.

3. Voter approval of taxes

It is arguable that a franchise fee paid by an exclusive franchisee and passed on as a cost to the ratepayer is a special tax requiring 2/3 voter approval.19 The only recycling-related special tax case decided by a Court of Appeal involved Alameda County's Measure D and its landfill surcharge.20 The Court found the surcharge was not a special tax requiring 2/3 voter majority. (Measure D received simple voter majority approval.)21

FEDERAL LAW

Where the federal constitution reserves an exclusive power to Congress and Congress chooses to exercise the power and not delegate it to the states, state law must defer to the acts of Congress.22

The best current example of how federal law may preempt a local flow control law is a 1995 Act of Congress to amend a law regulating motor carriers (truckers) who possess permits issued by the Federal Surface Highway Transportation Board (formerly the Interstate Commerce Commission). Congress enacted a law stating that local government may not prohibit completely the transportation service by federally permitted motor carriers of "property", although local government was permitted to enact reasonable health and safety regulations.23

A federal trial court in Portland, OR, found that this new act of Congress preempted an Oregon county's franchise system where the county barred the competitive collection service by a non-franchisee for the collection of material that was recycled, in fact.24

The trial court reasoned that material that is in fact recycled is property as that term is used in the federal law and that Congress properly exercised its power to preempt restrictive local legislation affecting federally permitted motor carriers.25

The local government has appealed this decision to the United States Circuit Court of Appeals for the Ninth Circuit where the case is now pending.26 The Ninth Circuit will be confronted with the question of what is "solid waste" as opposed to "recyclable" for the purpose of determining whether or not "property" is being collected by the non-franchisee. The Court might choose a bright line of whether the material is recycled in fact or not as opposed to the California Supreme Court's bright line of whether the material is collected for a fee or not. The Ninth Circuit decision might be appealed to the United States Supreme Court.

It may be possible to employ other federal laws to craft a pre-emption argument. RCRA's amendment to the Solid Waste Disposal Act is not preemptive since it specifically delegates waste disposal issues to the states.27 There is a split amongst the courts as to whether this Act regulates recyclables.28

CONSTITUTIONAL LAW

At least two clauses in the United States Constitution impact flow control legislation, the Commerce Clause29 and the Substantive Due Process Clause.30

A. The Commerce Clause

The United States Constitution grants Congress the exclusive power to enact laws affecting interstate commerce -- one of the cornerstones of America as a federalist state. Even where Congress has not adopted a law, a state may not adopt laws significantly affecting interstate commerce.31 The United States Supreme Court stated the guiding principle as:32

"Our system, fostered by the Commerce Clause, is that every farmer and every craftsman shall be encouraged to produce by the certainty that he will have free access to every market in the nation, that no home embargoes will withhold his exports, and no foreign state will by customs, duties, or regulations, exclude them. Likewise, every consumer may look to the free competition from every producing area in the Nation to protect him from exploitation by any. Such was the vision of the Founders; such has been the doctrine of this Court which has given it reality."

The United States Supreme Court has consistently found that "waste", even "hazardous waste", is an article of commerce enjoying constitutional protection against impairing state legislation.33 While most of the Commerce Clause cases have involved limits on the exportation or importation of waste and local regulation commanding that discarded material be disposed of at particular facilities,34 exclusive franchising -- regulation commanding that all discarded material be collected by one entity is just as suspect constitutionally where the local regulation substantially impairs interstate commerce. In fact, even impairment of intrastate commerce can be constitutionally proscribed.35

Likewise, material that is recycled is a commodity the same as eggs, gold, textiles, etc. and should enjoy equal, if not greater, constitutional protection than waste. These issues are also raised in the pending Ninth Circuit case mentioned earlier.

If a local regulation discriminates against interstate commerce either on its face or in practice, a court will find it unconstitutional unless the local government demonstrates under rigorous scrutiny that it has no other means to advance a legitimate local interest.36

Local regulation that burdens interstate transactions only incidentally are unconstitutional only if the local ordinance imposes a burden upon commerce which is clearly excessive in relation to the putative local benefits.37

On one occasion the United States Supreme Court held that a local legislative aim to reduce waste disposal costs was no excuse for impairing interstate commerce.38

A violation of the Commerce Clause is actionable, among other theories, under the Federal Civil Rights Act, which carries remedies of punitive damages, attorneys' fees and actual damages.39

B. Substantive Due Process Clause

Both the United States and California Constitutions forbid "arbitrary and capricious" exercise of local government's regulatory power.40 Like the Commerce Clause, courts have used a two prong approach to analyze claims of excessive regulatory power.

If the regulatory power impairs upon a "protected" activity (e.g. free speech) then the local government must demonstrate under rigorous scrutiny that it cannot achieve a legitimate public purpose any other way.41 Conversely, where the activity impacted by the legislation is not "protected" the local government's regulatory exercise must be "rational".42 In practical terms, unless the activity is "protected", courts almost always uphold local government's regulatory exercise.

There is California authority that the exercise of a lawful business activity is a "protected" activity.43 Under this view, a recycler may argue that it is engaged in a lawful business activity and therefore cannot be legislated out of existence by local government absent a compelling public purpose and no other means to achieve it. In a recycling industry context, this has not yet been presented to a Court of Appeal in California.

CONCLUSION

The recycling industry perspective on flow control generally is:

Garbage haulers should be compensated fairly for the waste collection service they provide. As a public service, the cost should be assessed to and subsidized by the users, the ratepayers who generate waste and don't recycle.

If the actual cost of providing the service is higher to the garbage hauler because it cannot collect (and profit from) recyclables, the generators of waste should absorb this cost. If the particular service area is remote, scattered, or distant from a disposal facility or transfer station, again this is a cost which either is absorbed by the ratepayers or results in a competitive bid process whereby lower overhead garbage haulers assume responsibility for the remote service area. In other words, a service area with 2,000 citizens should not be forced to absorb the cost of maintaining a hundred packer truck fleet of a national garbage company C the service provider must be to scale of the service area.

With legislative mandates for source reduction and recycling, discards that are marketable should be handled as any valuable commodity in free enterprise. If there is any mishandling, local governments have unquestioned power to regulate, short of outright ban, as health and safety warrants.

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The Problems with Flow Control & The Value of Competition
By, Rick Best, Californians Against Waste_______________________________________________

The flow control issue in California has evolved over the years into a debate over the ability of recyclers to collect recyclable materials by charging a fee. Although it may seem to be minor issue of how recyclers can do business, it has broad impacts on the development of recycling, impacting not only recyclers, but generators, manufacturers, and even local governments. Here are some of the ways that flow control undermines recycling:

Impacts on Generators

Impacts on Recyclers

Impacts on Manufacturers

Impacts on Local Governments

Importance of a Diverse and Competitive Recycling Industry

With its industrial base in Los Angeles and the Bay Area, California has developed a strong independent recycling industry. This diverse and competitive industry has played a critical role in fostering the expansion of recycling by:

Unfortunately, flow control now threatens this industry. If California wants to ensure that recycling opportunities remain diverse and affordable, it is critical that we protects the rights of this industry and to stop local governments from prohibiting fee-for-service recycling.

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The Alternatives to Flow Control
By, Joan Edwards, J Edwards & Associates__________________________________________ top

Every locality is different has has unique characteristics which should be taken into account when developing strategies to encourage increased recycling. A number of alternatives to flow control of recyclables and restriction of "fee for service" activities are noted in this section. Many more and variations on each theme are certainly possible. This section is intended to increase the dialogue about these opportunities and to help all stakeholders design approaches that will work best for their locality, while preserving maximum competition for recycling efforts.

As noted earlier, this section does not discuss alternatives to residential recycling collection activities, nor franchising of waste material destined for landfills.

Many of the resources noted in the Appendix can assist in developing more detailed approaches to these recommended alternatives or suggest how they might be tailored to a locality's unique situation.

Most of the alternatives fall into one of two categories: alternatives which work outside of a franchise or flow control situation, and alternatives which can be compatible with some form of franchising or flow control of refuse.

Promote Existing Recyclers - Build on the expertise and investment of existing recyclers to provide reuse, recycling and composting services to generators, rather than having to publicly fund such investments to meet AB939. Develop guides to reuse, recycling and composting businesses in the area and widely distribute them. Place such guides in garbage and other utility bills as inserts. Advertise these lists in local papers. Post on local websites. Be a model and contract for services with existing industries in the area. Include small businesses that cannot get recycling cost effectively otherwise in residential recycling programs. Clarify definitions in ordinances, licenses, taxes, contracts and franchises for "solid waste" and "recyclables." Invite all reuse, recycling and composting businesses in community to be involved in public solid waste policy-making and encourage them to be involved early before there are problems. Establish effective communication between recyclers and local government.

Provide Technical Assistance - Provide training and one-on-one assistance to local businesses on how they can use existing reuse, recycling and composting businesses. Hire staff or consultants to provide waste audit services to identify potential prospects for maximizing recycling. Help geographically contiguous or similar businesses to combine their materials for more cost effective recycling. Develop case studies and highlight local successes in local workshops, speakers at community meetings and with the media.

Economic Incentives - Provide economic benefit of increasing recycling to generators, haulers and landfill operators. For residents, adopt variable rate/unit pricing rate structures. For businesses, allow fee for service transactions and don't require all wastes from businesses to come to a single facility to be sorted there (allows businesses to decrease their waste disposal costs by increasing recycling). For solid waste and recyclables haulers, charge franchise fees only on wastes, not source separated recyclables. For landfill operators, charge business taxes only on materials buried, not those processed and shipped off site for recycling. Maintain solid waste enterprise fund for funding needed for solid waste services only without solid waste funds being used to fund other City activities. Establish level of fees required to support enterprise fund based on reasonably anticipated amounts of solid waste still going to landfills. Establish fees on landfills under your authority to fund solid waste activities. Join with other communities to establish county-wide fees on landfills within the county to fund solid waste activities. Establish a special use tax (requiring residents to approve) to fund necessary solid waste activities, possibly on a $/sq.ft. basis for commercial accounts instead of solid waste tonnage. Generally use garbage rates, fees and taxes to provide price signals to the marketplace that are consistent with the public policy goals of AB939.

Build Smaller MRFs - Oftentime material recovery facilities (MRFs) have been designed and built much larger than the total solid waste generated in the area to accommodate growth in population and wastes. Building smaller facilities (especially ones targeted to specific materials not currently recycled in the community by existing recyclers) decreases the public outlay of funds and allows independent recyclers to continue. Instead of designing and building MRFs for all solid waste in the area, build them only for the amount of solid wastes reasonably anticipated to come there AFTER aggressive promotion of existing private recyclers occurs.

Mandates and Bans - Require businesses and residents to separate their materials for recycling and require all franchised waste haulers to provide recycling services for those materials. Require businesses (or all those over a certain size) to meet the AB939 50% diversion goal and/or to submit plans to the City or haulers on how they plan to accomplish that. The City of Portland, Oregon's strategy for commercial businesses follows this approach, which was actually initiated after large businesses sought to avoid imposition of a franchise which they believed, based on experience elsewhere in Oregon, would increase collection costs. Ban certain reusable, recyclable or compostable materials from landfills without specifying a specific hauler (e.g. San Diego does for a multitude of materials, Sonoma County has done for Yard Waste and many counties in North Carolina did for corrugated cardboard).

Reporting - Establish license or reporting requirements for recyclers to provide sufficient data needed for AB939 reporting and monitoring of the system. Recyclers voluntarily provide data through trade associations (to maintain confidentiality).

Health & Safety - Establish by ordinance regulations governing the safe storage, handling and transportation of all reuse, recycled and compost materials. Work with Local Enforcement Agencies and County Health Departments to monitor and enforce.

Open Competition for Refuse and Recycling Services - Los Angeles is one example of a locality which has chosen not to regulate services for either refuse or recycling services, although it does provide municipal collection for single family residences and very small multi-family dwellings. This type of system has allowed the City to achieve high recycling rates with minimal investment or interference in the private sector. Businesses and institutions regularly save large sums of money through competition between various service providers. Single family and small multi-family dwellings are generally agreed to generate too little material at each site to provide cost-effective collection under an open competitive environment. Furthermore, a wide range of additional services (on-call bulky pickup) have long been considered essential by elected officials. Nevertheless, these smaller residential properties were documented to recycle at about 10% diversion in 1990 through access to independent drop-off and collection recycling services.

Again, the services of a single entity (Bureau of Sanitation) was needed to provide the comprehensive refuse, recycling and green waste collection services that allow maximum diversion (over 45% on many routes) and cost savings through route restructuring. However, a series of RFP and Bid procedures clearly demonstrated that the most cost efficient services for processing of residential recyclables resulted from an open competititve system that primarily utilized existing independent recycling companies. Even recent decisions by Los Angeles toward commingled residential recyclables and limiting facilities within large geographic areas, while increasing net costs and reducing competition, resulted in the use of existing independent recycling companies who made private capital investments to increase capacity.

Non-exclusive Franchise Systems - Many localities allow multiple haulers and recyclers to operate, as long as they each operate within some sort of permitting and oversight system. The systems vary and most require a fee. Some localities allow limitless numbers of service providers to do business. Others limit service providers, especially refuse collection services, to a set number. And still others regulate a limited number of refuse hauling services, but allow unlimited recycling services.

In most of these instances, localities have attempted to increase cost-effectiveness and service opportunities through competition, while addressing at least two of the concerns which often lead to franchising: municipal revenue opportunities and some additional regulatory oversight of collection services. Many also use permitting as a way to gather data on diversion activities (although changes to CIWMB reporting requirements are now primarily focused on disposal data).

Municipal collection and processing services - Municipal collection and control of processing services for recyclables is most common, as in Los Angeles, when dealing with the single family and small apartment complex residential sector, where quantities per pickup are limited and opportunities for independent recycling collection services are minimal. However, some localities do directly provide recycling collection and processing services to the commercial sector and/or multi-family complexes. In some cases, businesses are prohibited from taking advantage of private recycling services which charge a fee, even if that fee is much less than municipal recycling collection. This clearly places a damper on business interest in recycling when it increases diversion costs. It also limits information on the true cost of municipal services, given the way municipal budgets are prepared and information disseminated to the public. It can also negatively impact municipal diversion goals by limiting services for special or hard to handle recyclables or use of mixed processing facilities. .

However, other cities, such as Santa Monica, offer services in addition to (and/or in competition with) the private sector. This helps keeps competition open and costs down for all service providers. For example, Santa Monica awards a contract for drop-off locations for recyclables to service both small businesses and multi-family dwellings. It also competes for services to multi-family dwellings with private businesses and allows fee for service if the independent recycler is permitted. And it provides direct collection services, without competition, to single family dwellings.

C & D collection and processing services - Construction and demolition debris is an increasing focus of recycling initiatives, both because of the large quantities generated and because of the new technologies increasingly available to process this material and market its components as new products. Processing strategies include both manual and mechanical methods and there are numerous collection strategies and ways to separate this material. This material is usually naturally separated from other municipally generated waste. It can be further source separated into individual components (wood versus metal, etc), cost effectively comingled for further processing (wood, metal, gypsum combined), separated to remove comingled inerts for use as ADC, and even delivered as completely mixed demolition debris to a recycling facility which can achieve 70-80% diversion rates.

Because C & D collection is usually by debris box or large transport vehicles and due to the natural separation of this material from other municipally generated waste, this waste stream is ideal for "fee for service" recycling activity. The means of collection allows it to be cost-effectively brought to a mixed demolition debris recycling facility or to a more traditional recycler of source separated material without incurring the costly intermediate step of consolidatation at a transfer station.

Franchise refuse collection services, with opportunities for competition for recycling services - Some cities franchise refuse collection services for both the residential and commercial sectors, offer franchised collection of residential and commercial recyclables, and still allow open competition for commercial recyclables when service providers can meet some pre-determined test for recycling services. For example, the City of Fremont will allow open competition for commercial recyclables, even with fee for service, if the load does not contain more than 10% residue after recycling. This is reflected both in a City Ordinance, as well as in the franchise agreement. Another approach would be to allow fee for service collection of any loads which are delivered to a facility which the State has designated as a "recycling facility" and thus outside of their regulatory control (facilities which accept source separated recyclables and which can document diversion of at least 90% of total tonnage received each month).

As noted in the introduction to this publication, localities do have the ability to allow fee for service for recycling collection (and future court decisions may prohibit interference with fee for service for recyclable collection). However, it is important that municipalitiies be careful not to allow language in their franchise contract that could be interpreted as prohibiting this practice. In addition, passage of a municipal ordinance clearly spelling out when and how open competition for recycling services, with fee for service, is allowed can also clarify franchise contract references to recycling services and provide protection against "sham recycling".


Use of facilities which process mixed refuse or comingled recyclables for recycling - The use of mixed processing facilities which successfully remove recyclables from mixed refuse is increasing in the United States, but the technology utilized and recycling rates achieved differ greatly from facility to facility. This is a field where technology and diversion opportunities are changing rapidly and there is limited knowledge about the potential for different recycling rates and costs across the country. While facilities that have more than 10% residue are under the solid waste authority of the CIWMB, transfer stations, mixed processing facilities, and even some California landfills have recycling rates that range from less than 5% to over 75%.

However, many franchised cities have locked themselves into long-term costly "MRF" contracts with specified limits on recycling rates and competition for services, only to discover that other facilities could offer higher diversion rates at the same or lower costs.

As noted at the beginning of this document, one solution is to use or build smaller MRF's while waiting to understand emerging technology and private investment opportunities. Another is to separate collection and processing decisions in a franchise contract and to use shorter term contracts for processing agreements. The history of waste-to-energy facilities in the United States is an excellent example of how long term contracts backed by put-or-pay agreements can backfire on ratepayers. Finally, contracts can include language which provides a clear opportunity for the locality to direct both refuse and recyclables to lower priced facilities when they become available (and/or to provide for renegotiation of tip fees with the existing facility).

While facilities which process source separated recyclables usually have residue rates well under 10%, the technology, costs, and market expertise in this field can also vary dramatically. Again, a locality should utilize shorter contract periods or keep the right to require a franchised hauler to bring material to a lower priced facility when it becomes available.

As noted earlier, this section does not discuss alternatives to flow control or franchising of non-recyclable refuse. However, many of the groups listed in Appendix VI (a) can knowledgeably discuss this issue with you.


Other Sources of Information and Assistance

Appendix VI (a) includes information on five California organizations which have taken policy positions against limiting competition for recycling services and which may provide you with assistance in identifying ways to cost-effectively increase diversion in your locality without the imposition of costly flow control or franchise constraints.


Sample ordinances and contract language
Appendix VI (e) lists sample ordinances and contract language available for review by individuals interested in increasing diversion through use of independent recycling services.

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The Outlook in Courts, Congress and the State Legislature
By Rick Best, Californians Against Waste_____________________________________________


Although there have been strong interest by recyclers, local governments and waste haulers in seeing issue of flow control resolved, there is little potential for seeing this issue resolved in the near future.

There does remain that the potential opportunity to resolve this issue through the Courts if an ideal case could be found. Unfortunately, the only fee-for-service case (San Marcos) was clouded by the fact that it involved two competing franchise waste haulers. A case involving a independent recycler providing recycling services not offered by the franchise hauler might lead to a favorable decision.

Without the opportunity to resolve this issue through legislative or a favorable court decision, recyclers are forced to fight the flow control issue at the local level.

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List of Contributing Contacts and Associations
_______________________________________________________________

CRRA- The California Resource Recovery Association
785 Orchard Drive, Suite 225, Folsom, CA 95630
Phone 916-441-CRRA; Fax 916-932-2209; Email crra@crra.com; www.crra.com

CRRA does not contest the right of local governments to franchise solid waste activities, however, recyclables are not solid waste. State-mandated diversion goals can best be achieved with the cooperation and assistance of the private sector in expanding and strengthening the existing recycling infrastructure. The materials generated by a business are constitutionally protected as private property and they should have the opportunity to reduce their disposal costs and otherwise benefit by helping to achieve state-mandated diversion goals. The most efficient means to recycling is through free and open market competition in which generators are free to choose their recycling service, upholding their right to recycle. As the cost of collecting recyclables may render their value negative, the collection of recyclables is a service and the provider of a service has the right to charge for that service. Similarly, generators should be clearly authorized to donate or sell their materials to recyclers and to pay for reuse, recycling and composting services. "Solid waste" should be clarified to exclude recyclables which should instead be defined as commodities, subject to a test of their residuals to ensure that wastes are not misrepresented as "recyclables".


NCRA- Northern California Recycling Association
P.O. Box 5581 Berkeley, CA 94705
Phone (510) 558-0991. Email: ncra@ncrarecycles.org

Opposes franchising of commercial recycling. Supported the City of Pittsburg's recycling ordinance. States benefits as:

ACRI, Association of California Recycling Industries
19671 Beach Blvd, Suite 300-1, Huntington Beach, CA 92648 (need updated info)
Phone 714-374-4914.

ACRI is a non-profit trade association that represents 60 of the largest independent recycling companies in the state of California. ACRI members collect, process, and broker recyclable commodities such as paper, cardboard, plastic, aluminum, newspaper and glass to businesses that utilize them to manufacture new products. ACRI members collectively employ over 1,300 people and post gross sales revenues of approximately $680 million dollars per year. Our member businesses, directly or indirectly, have helped municipalities throughout the state meet the mandated goals of Assembly Bill 939 - a 25% reduction in disposed solid waste by 1995 and a 50% reduction in disposal by the year 2000. On average, ACRI members return 80% of the profit realized from recycling transactions to the generator.

GLASWMA-Greater Los Angeles Solid Waste Management Association
568 E. Foothill Blvd., Suite 115, Azusa, CA 91702; Phone: 818-815-2890; Fax: 818-815-2892; Email: Glaswma@cs.com (Janet Oliphant)

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ENDNOTES