Seeking control: franchise rights to control generated material are shaping up as a recycling battleground

Recycling Today, May, 2003 by Dan Sandoval

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.

MANAGEMENT TECHNIQUE. For many municipalities, franchise agreements, whether exclusive or non-exclusive, provide some control over the waste and recycling stream.

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.