Seeking Control

With markets providing one set of challenges, some recyclers are also now seeing potential problems with the issue of franchise agreements. The concept of franchising has taken hold in
many parts of the U.S. For local government entities, the possibility of establishing recycling and solid waste franchises can accomplish a host of things: improving the overall standard efficiencies, attaining and/or surpassing solid waste reduction goals or increasing recycling levels, perhaps even generating revenue. The final issue, some contend, is the main reason for the increased interest in franchising—for cash-strapped communities to increase revenue.

For those in the recycling and waste management industries, these concepts are a point of determination on how to successfully implement an effective program.

For recyclers of traditional materials, the concept of franchise agreements is not as large a concern as it may be for companies involved in the construction and demolition industry. However, despite a fairly general acceptance that recyclables such as old corrugated containers (OCC), old newspapers (ONP) and aluminum cans are not included in most of the arrangements, there are cases where even this rule is not necessarily holding true.

In the state of Florida, despite the fact that traditional recyclables are not defined as part of the waste stream according to state of Florida laws, there are some concerns with the imposition of franchise arrangements in certain cities.

Tampa, Fla., was billing Visy Recycling, a Georgia-based paper recycling company, $50 per container per year to leave its containers at locations in the city. Although $50 per year may not seem like a significant cost, for larger recyclers with a considerable presence, the overall charges can add up.

According to Steve Levetan, a Norcross, Ga.-based consultant working with the recycling industry, one of the biggest points is that the recycling industry needs to differentiate itself from the solid waste stream. "We call it recovered material. Scrap is not solid waste."

While most cities use the exemptions for recyclables, Levetan notes that Tampa has tried to impose a franchise policy for recyclables. This, he notes, "is a sloppy approach." The inconsistency with Tampa pushing through a franchise concept for recyclables has been singled out as an abuse of existing state law, Levetan adds.

As to the possible franchising of recyclables in the Southeast, Levetan says that the concept of franchising should deal with waste, not recyclables. Therefore, he adds, cities should not be able to impose a charge on a company leaving containers for recyclables collection.

While for the most part cities have recognized the differences, Levetan points out that often he has had to go into a city, on behalf of a recycler and explain to local administrators that the legislation to prevent an incorrect charging of the recycling company.

Fortunately, there are still many local government entities that are looking to create a franchise arrangement that they hope will boost recycling, as well as improve the lot of many independent recyclers.

The city of Hawthorne, located in southern California, recently unveiled a solid waste and recycling program that aims to boost the recycling level by opening up the commercial sector from a franchise agreement to one of open competition for "clean recyclers."

Gary Liss, a consultant who has worked with the city in developing the program, says that the move by Hawthorne will maintain a franchise arrangement for solid waste hauling, as well as the handling of "dirty" recyclables. However, for clean recyclables, individual, independent recycling companies may solicit business from various businesses.

What is unique about the plan, Liss says, is that while many of the largest cities in California have an open competition for recyclables, many of the smaller cities in the state fall back on either exclusive or non-exclusive franchise agreements.

While putting the onus on generators to meet recycling goals, Liss stresses that independent recyclers in the Hawthorne area are encouraged "to go out and solicit business" from companies.

The city took the step to open up the recycling competition after the California Integrated Waste Management Board conducted a Biennial Review of the city’s Source Reduction and Recycling Element and after public hearing, found several deficiencies.

It issued a compliance order that became final and effective in early 1999, including a schedule of compliance with actions that the city was mandated to implement. To reduce the amount of material going to landfills as much as possible , the city offers commercial businesses their choice of hauler. In order to provide city businesses with choice of solid waste hauler, Hawthorne is providing solid waste collection services for its commercial businesses through nonexclusive, citywide agreements.

In conjunction with the city’s executing this agreement, the city code is being amended to establish a limited number of qualified haulers. By entering into this agreement, the city establishes performance standards, customers’ rights and program enforcement flexibility. This agreement helps the city achieve the following goals:

In a nutshell, Liss stresses that the new franchise policy, rather than wedding residents and commercial entities to one or a handful of recycling companies, has allowed for greater competition from independent companies to come in and solicit for business.

While the program is only now being rolled out, he adds that Los Angeles County is looking at the possible success of the program as an indicator that other cities in the county could adopt similar approaches to handling the recycling and solid waste issues.

At the present time many of the state’s larger cities have open competition for recyclables. However, there are some possibilities that smaller cities in other parts of the state and country, which traditionally have used franchise agreements for both solid waste and recyclables, could incorporate some of Hawthorne’s policies.

Many C&D recyclers claim that a growing component of their business is in the recycling of mixed C&D debris. However, often legislation does not stipulate that C&D is different from solid waste. Therefore, according to state law a company with an exclusive franchise has the right to take all the waste, including the construction and demolition waste.

This issue concerns many C&D companies who could end up paying significant costs to an outside vendor to move their material. Jason Fox, vice president of operations for Central Environmental Services, Orlando, Fla., says that according to Florida state law even though the collection containers are on his company’s property, Central Environmental would have to pay the franchised waste hauler for every container it used at the site.

With Florida a major battleground between waste haulers and C&D companies, a new piece of legislation hopes to differentiate C&D debris separately from solid waste.

Tom Roberts, president of the Construction Materials Recycling Association (CMRA), says that a Florida Senate bill, SB 1462, has been introduced and aims to differentiate between the two streams. The bill, introduced by State Senator Al Lawson, aims to come up with a definition for C&D that would give handlers of this material some relief from the onus that franchises have on their company. According to the Senate Bill, "An act relating to resource recovery and management defining the term recovered construction and demolition materials for purposes of resource recovery and management; providing for certification of facilities that handle recovered construction and demolition materials; prohibiting local governments from adopting certain ordinances with respect to such facilities and materials; providing for a registration process; authorizing rules; requiring facilities at which recovered construction and demolition materials are handled to use scales meeting certain criteria; requiring such facilities to keep records of materials recycled or reused and of materials not recycled or reused; providing an effective date."

In short, the bill hopes to develop a new category, called "Recovered Construction and Demolition Materials." This category would apply to any materials which are capable of being feasibly recycled or beneficially reused.

Roberts says his group expects to have the bill heard by a senate subcommittee fairly soon.

Along with many C&D companies in the state, other groups in favor of the proposed senate bill include the Florida Recyclers Coalitions. Additionally, builders in the state have shown positive support and other environmental groups are in support of this legislation, according to Roberts.

Meanwhile, as more C&D companies seek to have their material reclassified as a recyclable material, the number of landfills and end sources for C&D waste continue to decline. According to Roberts, there were roughly 300 C&D landfills in 1994; in 1998 there were only 90 landfills capable of taking in construction waste.

While some supporter adding a new category in Florida, some groups oppose the definitions. Many local communities oppose removing C&D material from the waste stream. By exempting this material it could become more difficult to meet state-mandated recycling levels.

Secondly, past history has found that some "recyclers" sought to re-classify themselves to avoid more costly permits and licenses. However, some of these companies only processed for recycling a very small portion of the waste stream.

Another group that may not be the strong ally sought is the traditional recycling industry. This group, only now starting to escape from the mantle of waste handlers, is leery of being lumped back in with a material that is far less recycling oriented.

For the most part recyclers have been able to differentiate themselves from the solid waste stream. Many construction and demolition operators hope a similar exemption will allow them to operate outside the franchise policies.

No one contests that an increase in the recycling of C&D material would be welcome. However, some recyclers are concerned that legislation such as the Senate bill being introduced in Florida would unravel much of what traditional recyclers have accomplished.

A key concern is that while recyclers have worked very hard to differentiate recyclables from the waste stream, adding other materials to the "recycling" stream could sully the impression of recyclables as being a highly recycled (and recyclable) material.

Levetan says that if C&D material was classified the same as OCC, ferrous metal and various grades of paper could result in traditional recyclables being tarred by solid waste.

John Skinner, executive director of the Solid Waste Association of North America, says that there are several types of franchises, as well as other programs that various cities use. For franchise bidders, there are both exclusive and non-exclusive franchises. The advantages of the exclusive franchise, he notes, is that there is often an economies of scale benefit. "There are more efficiencies" with one company handling all the material.

The franchise issue, however, is primarily dealing with solid waste, rather than recyclables and solid waste. For opponents of franchising, concern always flows toward the assurance that recyclables are not considered part of the solid waste stream.

The advantage of franchises, whether exclusive or non-exclusive, is that the local governing authority is able to set minimum standards and environmental service requirements, Skinner adds.

And, since many recyclers focus most of their energies with collecting and processing recyclables from outside the residential sector, most franchise policies do not include them. Skinner says that the commercial stream is more toward the open market, which allows for competitive processes between various recycling companies.

There is a lack of clarity over whether franchise policies could have a negative (or positive) impact on the recycling industry.

While some opponents feel that the issuance of exclusive franchise agreements incorporates many of the most problematic aspects of flow control into the handling, transporting and collection of recyclables, most feel that in its present state, franchise agreements will have a minimal impact on the traditional recycling industry.

But for some recyclers, sorting through the current maze of arrangements and paying fees not figured into their operatings costs is proving troublesome.