More than six years after Los Angeles launched its commercial waste franchise system, many haulers are struggling to hit contractual disposal reduction targets. City officials are weighing numerous options that could change the program’s future.
The system, known as recycLA, encompasses more than 66,000 accounts (including commercial buildings and multifamily buildings of five units or more). Its 11 zones are serviced by six haulers, including the industry’s two largest players — WM and Republic Services — and large local company Athens Services.
Under the current contracts, haulers are required to provide black, blue and green bin service to any customer within the system, while also working to meet contractual obligations around diversion and many other initiatives. LA Sanitation and Environment touts many aspects of the program as a success, but also says the program’s goal to cut 1 million tons of landfill disposal by 2025 will likely not be met.
Contracts that took effect in January 2017 are approaching the back end of their initial 10-year terms. The city must now decide whether to extend for five years with renegotiated expectations, issue a new RFP for some or all zones, or possibly take over service itself.
Despite multiple rounds of negotiations since October, LASAN said recently that it has yet to lock down an agreement.
"We had healthy discussion and healthy debate and some progress with the [recycLA service providers], but it wasn't significant enough at this point to come before you with a contract amendment,” said LASAN Director Barbara Romero at a Dec. 8 meeting of the Los Angeles City Council’s Energy and Environment Committee.
Key sticking points include haulers “under performing” on scaling organics recycling service, costly access and distance fees that haulers charge to customers and state fleet electrification requirements. The clock is ticking for all three.
While LASAN fined five haulers a total of $12.2 million in liquidated damages earlier this year for failing to meet their 2022 disposal reduction targets, all of the companies have appealed.
In the meantime, CalRecycle is actively working with the city to bring it into compliance for not having full-scale commercial organics recycling as required by state law. The city is currently subsidizing access and distance fees for blue bin service, at a cost of $23 million per year, subject to annual budget decisions.
The California Air Resources Board’s requirements for zero-emission vehicles were not contemplated when the contracts were signed, and a recent LASAN report most haulers were still only at the “early stages” of planning and researching for electrification.
These factors and others have left LASAN in a highly complex position of planning for multiple outcomes simultaneously, all of which have the potential to increase costs.
“It’s expensive to do the right thing and there's only three options — we pay more, the consumer pays more or our provider pays more. And two of those are really bad,” Councilmember Tim McOsker, vice chair of the committee, said during the recent meeting.
Complex decisions
LASAN launched recycLA in July 2017 with a goal of modernizing the city’s commercial waste system. Athens, Republic, Universal Waste Systems, WM, CalMet Services (acquired by Athens in 2022), NASA Services and Ware Disposal were awarded the initial contracts.
While the program had a difficult rollout, LASAN now touts a 99% collection efficiency rate with 24/7 customer service support. Worker health and safety requirements are stronger, as are community protections. Any facility handling recycLA material must be certified by LASAN (42 have qualified to date) and eventually all of their operations will be enclosed.
All haulers had to phase out diesel trucks and many have streamlined their routes, with the city estimating a reduction of over 1,400 vehicle miles traveled per week.
Nearly all customers have blue bin recycling service and maximum prices are capped at contractual limits. Haulers have funded $3.1 million in food rescue programs to date, recovering nearly 27,000 tons of edible food as of September.
During a Sept. 29 council meeting, Romero called it “a very ambitious program with some very significant environmental goals,” noting that while there have been multiple successes "it's also been at a cost, not only to the city but to our customers.”
Dan Meyers, division manager for the program, said at the meeting that the access and distance fees charged by haulers when containers are not directly reachable have had a “significant impact.” The agency’s report showed large numbers of customers get charged these fees in each zone.
"In many cases the access and distance fees for customers can exceed their monthly rate for just their solid waste service,” said Meyers.
A detailed report outlined how the ability to charge fees for each type of bin can also inhibit diversion. Following a 2019 contract amendment, customers no longer have to pay access or distance fees for blue bin service and have saved an estimated $144 million.
Yet the city’s responsibility to bear 50% of those fee costs through its Removing Barriers to Recycling program is considered untenable and LASAN is angling to see the fees dropped entirely. And even though 97% of customers now have blue bin recycling service the agency said recycling “tonnage collected remains below targets.”
This, combined with many haulers not hitting their targets for organics diversion, led to the program missing its disposal goal in the latest measurement period.
Athens was the only company to achieve its disposal reduction target, aside from the zone previously serviced by CalMet, which did not meet the threshold for liquidated damages. The company declined to comment on how it achieved this target. LASAN’s report noted it was also reviewing the data from other Athens zones, with the possibility to change its decision. The agency declined to comment on the status of that review, or any other questions.
The other five haulers received liquidated damages notices for a collective $12.2 million earlier this year. According to LASAN, all of them claimed force majeure due to the pandemic and are appealing the decision. Multiple councilmembers suggested such fines may be too low.
This follows the assessment of $3.4 million in liquidated damages for other customer service issues through May, $2.2 million of which had been paid so far.
In the future, LASAN hopes to improve diversion performance by making green bin organics service part of a bundled rate. It is currently an add-on that customers must opt in to, because when the program launched organics processing infrastructure was still evolving.
Starting in January, LASAN will begin enforcing its own commercial organics ordinance under SB 1383 after an extended pandemic delay — which has affected processors in the region, such as Anaergia — and the agency said haulers are overdue in helping ramp up participation.
“The contracts fully contemplated compliance with organics, including all customers having organics service. So there should be no unanticipated cost associated with the provision of that service,” said Meyers at the December meeting.
During both recent council hearings, it was mentioned that CalRecycle has been actively engaged on the recycLA compliance issue and financial penalties could be coming if the city didn’t accelerate its progress.
CalRecycle confirmed that in June 2022 it placed the city on a formal plan to address barriers to achieving AB 1826 and SB 1383. LASAN has reported progress on meeting these requirements, including efforts to boost participation by providing kitchen pails to customers this year.
What’s next
While LASAN’s initial options also included allowing the recycLA program to continue under the status quo, councilmembers and agency staff did not consider this a viable plan. Instead, LASAN is hoping the companies will agree to some kind of change.
Speaking on Sept. 29, Romero said that cooperation with the haulers “is critical if this program is going to survive in its current form,” adding that "if we want to change our results we need to revisit the contract."
WM did not respond to a request for comment, and Republic declined to comment. Councilmember Katy Yaroslavsky, chair of the environment committee, could not be reached for comment about her current view of the negotiations.
At the September hearing, recycLA boosters such as Teamsters Local 396 and the Los Angeles Alliance for a New Economy testified that the program should continue with modifications as needed.
“We supported it from the very beginning and we'd like to see it continue,” said Jim Smith, political director for Local 396, during the Sept. 29 hearing. "This program has really benefited the city.”
The union did not support the possibility of LASAN taking over service, and the city has recognized this would be a lift.
"We do not have the resources. We do not have the drivers, the trucks, the yards,” said Meyers on Sept. 29.
Preliminary esimates found that while the agency is technically capable, as it already provides residential service, it would need to hire over 900 people. Other possible costs would include building a publicly-owned MRF (estimated at $120 million), plus electric trucks and associated infrastructure (upward of $2.4 billion).
In the meantime, the need to accelerate progress on organics service is a pressing one as CalRecycle’s agreement with the city ends this year.
“CalRecycle has been meeting with the city staff every two months to ensure that progress is being made. We are not planning to extend any of the formal plans,” said spokesperson Lance Klug via email.
While LASAN reported a notable increase in green bin service, up from 20% of customers to 28% in recent months, more work remains. Meyers said recycLA customers will soon begin receiving 60-day compliance warnings and the first penalties could be issued by March.
"We're getting close to exhausting the negotiation process as the means for accomplishing our goals for this program,” said Yaroslavsky on Dec. 8. “I don't want to go to an RFP process as I see our organics compliance is a major and pressing issue that will only draw that out further, but if we can't resolve the major pieces by the end of this month I think it's a necessary step."
The committee requested that LASAN report back on its progress by Jan. 26. The agency could issue an RFP as soon as April if required.
