Recology’s proposed rate hike for refuse collection was a major topic of discussion at our April members’ meeting. Paul Giusti, Recology’s Community and Government Affairs Manager, explained the proposed refuse collection rate increase; 16.5 in year one, 5% in year two and 0.6% in year three – (a total increase of 22.1% over the next three years!) He also described Recology’s and the City’s vision for the future of San Francisco waste management.
The format of the evening was a short presentation by Mr. Giusti, followed by questions and comments from me and the audience. Mr. Guisti seemed taken aback by the clarity of our analysis showing the actual rate increase proposed for two to five unit buildings and by the level of resistance of our members. In response, he suggested that Recology might consider a lower base charge per unit fee but frankly, I have little confidence that will happen.
Recology’s Justification For the Huge Rate Hike
Recology says the funds generated by the rate hikes are needed in order to invest in programs to:
- Update facilities’ processing technologies and infrastructure to accommodate increased volumes of recyclables and adhere to state composting regulations
- Purchase new trash and recycling bins
- Maintain a new five-year labor union agreement
- Establish new outreach and education programs
Who is Recology?
Recology is a privately-held company. As such, it releases little in the way of financial data. Its 40 subsidiaries generate $800 million a year in revenue – $220 million from San Francisco customers (FY 2010). The City guarantees Recology a profit of 9.5%. As a 100% employee stock ownership company (ESOP), it avoids most corporate income taxes. A consultant’s analysis prepared in 2010 reported that Recology’s pre-tax profit margin was well over twice the industry average.
Recology has had a cozy arrangement since 1932 when it won an exclusive no-bid refuse collection contract with the City. A normal privately-held company seeking to raise cash to invest in its business (the justification for the rate hike), can’t just raise prices by up to 50%, as Recology is proposing. In a competitive business environment, customers won’t stand for it; they’ll simply take their business elsewhere. But Recology is no normal company – it’s a City-sanctioned monopoly with no competition and it clearly wants to keep it that way. To wit: in 2012, Prop A, a city ballot measure, sought to break up the monopoly but Recology’s $1.5 million “No on A” campaign ensured the company’s continued status as the only game in town.
Why Burden Small Property Owners?
Two-to five unit buildings are being saddled with an unfair distribution of cost burden by Recology’s new base charge/unit scheme. It also demonstrates the company’s plan to keep owners of single-family homes “in line”. An independent search of Recology’s website and calls to its staff paint a picture of a massive obfuscation effort which Recology has set up for ratepayers to wade through. It has been like pulling teeth to obtain decent information and explanation from both the Independent Ratepayer Advocate (IRA) and Recology. The IRA is supposed to be looking out for the ratepayer, yet is passing on the party line dictated by Recology. In addition, it’s been made nearly impossible to effectively oppose the rate hike because 100,000 signed letters of protest – no e-mails or faxes allowed – to the Refuse Rates Hearing office must [have been] received before May 4th in order to overturn the plan.
One of Recology’s justifications for the rate hike is that its income stream from black-bin trash is diminishing because people are sorting their trash and distributing it into blue and green bins. If that’s so, why is Recology actually decreasing the rate for black-bin trash? Shouldn’t the rate increase? Instead, Recology is transferring the cost burden to the base charge/unit fee, which penalizes two to five unit building owners, especially those who cannot pass the added cost through to the tenants if they’re under rent control.
This brings us back to the City’s goal of no black-bin trash – note how the City has wordsmithed the goal as “Zero Waste.” This is most likely a key driver behind the rate hike. It could well be that Recology is being squeezed by the City to invest in equipment, technology, additional manpower and who knows what else to justify this rate increase.
Stepping back and trying to get some perspective on the erroneous approach Recology is taking to the alleged need for increased rates, the problem can be clarified by examining how another country, Ireland bills for refuse collection service. In Ireland, each property owners pays an annual refuse fee (about $75) to open an account. Account holders are advised to keep a balance in their account to cover the weekly pick-ups. Owners pay a small charge per lift plus $7 for the green bin – no charge for the blue, and by weight for the black – an incentive to generate less black-bin waste. Ireland’s system is pragmatic and fair, not a pipe dream. By contrast the Recology proposal is dishonest and by shifting the burden to two to five unit building owners, class-discriminatory, exacerbating the class warfare that already infects our city.
In conclusion, it can only be said that Recology has failed to show a clear justification for the rate hike. What’s more it is misappropriating the burden of any justified cost increase to the two to five unit category, namely small property owners. The prospect of paying up to 51% more for the same service should be ample reason for us to flood the Refuse Rates Hearing officer with protest letters.
[AOA: This is exactly what is happening in Los Angeles today! Four years ago there was a “massive” fight over this and most Councilpersons voted consistent with the recommendation made by the County Federation of Labor. Approximately 168 small trash haulers were put out of business. The City was divided into seven territories. The mega-super-large trash hauling companies obtained all of the contracts and a virtual monopoly. One L.A. property owner received an increase from $85 to $270 a month! Because of this trash monopoly, an owner does not even have the right to choose a different company who may be offering lower rates. Looks like San Francisco is following suit – write to your Refuse Rates Hearing Officer today!!]
Robert Noelke is a SPOSF/SPOSFI Board Member. Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News. For more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org or call (415) 647-2419.