The below article was written by Jack Humphreville of the L.A. 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.
Trade Show a Huge Success!
Our Million Dollar Trade Show and Landlording Conference last month was a huge success! You should have been there! Our members were more educated, motivated and stimulated by some very knowledgeable speakers who helped give them that one idea that would help them make and keep more money than ever! Some even walked away with valuable prizes given away at every seminar! WOW! Where else could you possibly spend a more profitable day? There was no place in the world like the Los Angeles Convention Center on Thursday, October 19th! Thousands of our members really know how to take advantage each year of this incredible source of information and…it was all free! It’s just one of the many services we provide our members in addition to the lowest membership dues and credit check fees as well as the best service in town! You have truly made AOA the #1 Apartment Association in the whole state!
Many thanks go to our dynamic speakers – Eviction Attorney Dennis Block, Attorney Michael Brennan, Tax Expert Karla Dennis, Foreclosure Specialist Bruce Norris, Nick Sidoti – also known as, “Dr. Cash Flow”, Asset Protection Specialist Dale West, Tax Lien Specialist Dan Eckelman, and Financial Planner Aaron Dent. They provided the most powerful and contemporary information on wealth-building and apartment landlording that you’ll ever be able to find.
Our thanks also go to our large variety of exhibitors and their commitment to our members in offering the best possible professional assortment of services. Be sure to see highlights of the show and photos included in this issue and on our web site at aoausa.com!
And … a very special thanks goes to you, our members, who truly are the essence of our trade show success! Your generosity to our Union Rescue Mission’s “Christmas in October” program was greatly appreciated. Thank you! And your thirst for knowledge in your pursuit of excellence is a driving force in the betterment of our industry! A thousand thanks….and we’ll see you at our next trade show at the Long Beach Convention Center on Thursday, May 15th, 2018.
It pays and saves you big just to be an AOA member. BUT … it pays and saves even more for those owners who turn up every year to discover new ideas at the Big Show!
Be sure to mark your calendar for “AOA Show Time” at the Long Beach Convention Center Thursday, May 15th, 2018.
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 and can be reached at [email protected].