Franchise agreement comes with higher rates, rough transition
Local property owner William Sheridan has found himself bewildered and frustrated by garbage.
The waste bills for the two apartment complexes he manages in Chico will eventually increase by $21,895.92 per year under the city’s new franchise agreement with Recology and Waste Management, he said.
Though his bills, administered by both companies, have already started to climb, his service hasn’t improved during the transition. Sheridan is perplexed as to why the city pursued the agreement: All he has seen is a degradation of service and massive fee increases. “Ultimately, all of our expenses are borne by the people who rent properties from us,” he said. “The people who can afford to pay rent the least are the renters of apartments. I do apartments because I can give people more reasonable rent and I have economies of scale.”
Sheridan isn’t the only one beleaguered by the change—about 25 property and business owners jumped at the chance to sound off at a two-hour meeting hosted by the North Valley Property Owners Association on Jan. 30 at the Old Municipal Building. Their biggest grievances? What they see as astronomical fee increases and service issues.
Richard Stewart, manager of Westpark Plaza, said his bill initially increased by $300 per month for the same service. “That almost sounds criminal to me,” he said.
From the city’s perspective, many commercial customers are experiencing increases because that market was previously unregulated, allowing the businesses to negotiate individually with customers, some of whom paid much less than others. Under the franchise agreement, those rates were averaged to create new maximums, which means some customers are seeing significant bill increases and others decreases.
“There were a lot of people getting sweetheart deals before,” said Waste Management District Manager Dave Adler. “Now everybody is being treated fairly and paying the same rate.”
The franchise agreement comes after years of city staff conversations, private negotiations and committee and council meetings. As of Oct. 1, 2017, Waste Management took over all residential accounts, and commercial customers, including dwellings of five units or more, were split into two districts, one for Recology and one for Waste Management, eliminating the competitive market.
It’ll be like this for the next 12 years, and the city will bring in $800,000 annually in franchise fees. For at least the first five years of the agreement, those funds will be directed to major road repairs.
Sheridan sees it as a tax that wasn’t approved by the voters. “I believe strongly that the City Council sold out the entire business community with no need to do so, because the onus for compliance of the [state] regulations is on the property owner, not the city of Chico,” he said. “They want the tax revenue.”
City Manager Mark Orme disputed that claim, stating it was not a cash grab, but a decision made in “good faith.” He thinks the strongest evidence of that is the City Council decision to inject all the cash received from the haulers into repairing city streets, which have been directly impacted by refuse-collecting trucks.
“From the city’s perspective, we went through the public process and had a vast number of conversations in a public forum to make sure the public was aware of this coming. Years,” he said. “This is something the city needed to do to ensure compliance with state regulations and to get more trucks off the streets.”
Several state Assembly bills passed in the last 10 years have set statewide recycling goals and mandated recycling and yard waste programs. Richard Tagore-Erwin, a consultant with R3 Consulting Group Inc., which drafted the agreement, said state mandates are easier to enforce within a franchise system because the city can pursue liquidated damages, fining the companies for providing inadequate service. There was also concern from the city that one of the vendors might stop providing services in Chico, leaving the city with a nonregulated monopoly that could charge whatever it wanted.
Tagore-Erwin said the city can request a detailed cost of service report in a year to make sure the companies are not overcharging, but he could not speak to whether costs are being passed on to customers.
So, what can citizens expect moving forward? The city establishes maximum fee rates and reviews them annually. Those are anticipated to increase this summer based upon the Consumer Price Index for urban consumers, never to exceed a 5 percent increase in one year.
Either way, there are still a lot of disgruntled customers. Take Danielle Ius, owner of Sin of Cortez, as an example. She said her rate has gone from $345.53 to $446.11 per month, an additional $1,206.96 per year. Ius says the fact that the agreement is generating only $800,000 a year for the city doesn’t seem like enough considering the disturbance it has made. She’s trying to avoid spending more energy on it because there’s nothing she feels she can do.
“You want to fight the battles worth fighting,” she said. “The end result isn’t going to change, in my opinion. I hope it does, but I don’t see it happening. The city’s already done it, the deal’s been made.”