Waste-hauling franchise agreement could be huge windfall for city, burden on ratepayers
The heavy vibrations of a garbage truck are familiar for city-dwellers, a refrain in the soundtrack of urban living. That’s certainly the case in Chico, where those giants rumble down residential streets multiple times a day.
That repetition is due, at least in part, to the city of Chico’s current arrangement with two waste-hauling companies—Recology and Waste Management—that compete in an open market for residential and commercial accounts. As a result, any given street in Chico is lined with customers of both companies, their trucks collecting trash along the same routes.
Overall, it’s an inefficient system that wears down roads and doesn’t align with the city’s goal of reducing vehicle emissions, as outlined in the Climate Action Plan. That’s why the Chico City Council is exploring the possibility of a franchise agreement that would evenly divide the residential accounts between Recology and Waste Management into two exclusive zones. (The two companies would still compete for commercial customers.)
For the revenue-starved city, there’s another consideration: A franchise agreement could have a positive financial impact of $1.5 million to $2 million annually, city officials have estimated. As much as $800,000 of that could come from franchise fees, which would go into the general fund, Assistant City Manager Chris Constantin explained during a recent interview.
“The city streets are an asset of the public,” he said. “Therefore, if somebody wants to use them and make money off of it, they’re going to pay us, just like you would pay McDonald’s to use their name. A franchise fee pays for the pleasure of having exclusive rights to use our streets.”
The rest would be money saved by contracting out the current city duties of street sweeping and leaf pickup to the haulers, he said, though final figures depend on negotiations.
With such clear-cut benefits for street infrastructure, the environment and the city’s coffers, deciding whether to adopt a franchise agreement for waste-hauling might appear equally straightforward. But not so fast.
As many community members have noted, saddling the waste-haulers with extra business costs would almost certainly trickle down to customers in the form of rate increases. Steve Depa, president of the North Valley Property Owners’ Association, made this point during a council meeting back in December.
“A franchise fee is a form of tax going by another name,” he said. “Let’s be up front and call it what it is—a fee that will be imposed on every person in the city who has trash collection.”
City officials have kicked around the possibility of adopting a waste-hauling franchise agreement for years, but former City Manager Brian Nakamura—who oversaw the implementation of such a system in Hemet, where he’d previously served as city manager—really got the ball rolling.
During that Dec. 17 council meeting, the panel authorized Nakamura’s request for $99,000 of supplemental funding for R3 Consulting Group to evaluate a franchise agreement. In April, R3 presented various options to the Finance Committee, which in turn recommended a plan to the council.
As for the companies taking on leaf collection, street sweeping and illegal dumping pickup—all services the city offers for free—Constantin does not predict job losses. Those duties demand about 6,000 hours of city staff time each year, he said, and contracting out to the haulers would allow the city to direct resources to other priorities, such as parks and street maintenance. “I don’t expect city employees to be negatively impacted in the form of layoffs,” he said. “Those 6,000 hours will go elsewhere.”
However, under the arrangement, the city wouldn’t pay the companies for those services, so the costs incurred would get passed along to ratepayers. Joe Matz, vice president and general manager of Recology, said as much during a council meeting last November, during initial discussions about a franchise agreement.
“Nothing’s for free anymore,” he said. “It’s going to show up somewhere in the rates.”
Matz added that leaf pickup and street sweeping are services Recology and Waste Management already provide in other cities, and both are “very capable” of handling the tasks.
Constantin said the waste-haulers are supportive of partnering with the city.
“I believe their desire is to have a fair opportunity to negotiate and discuss the options,” he said. “Ultimately, it will be the City Council that decides what kind of services we’ll offer the public.”
The council is set to consider the waste-hauling franchising option during its next regular meeting on Tuesday (Sept. 2).