Recycling Law Will Cost O.C. More Than It Saves : Landfills: County faces stiff fines if it can’t meet trash reduction goal, while residents face huge garbage bill increases if it does.

California’s waste recycling law, designed to head off a looming garbage glut, is plunging Orange County’s landfill system toward bankruptcy and forcing officials to contemplate huge residential rate hikes as a way to save it.

The logic behind recycling--to conserve resources and reduce the amount of garbage being buried in the state’s dwindling landfill system--remains sound. But Orange County residents face a frustrating Catch-22: The more they recycle, the less garbage goes to landfills. But rather than reducing monthly trash bills, it may increase them.

That’s because it costs the county about $120 million a year to operate its landfills, and that hardly changes even when the volume of trash declines. So in order to keep the landfills operating, officials say, they need to raise the per-ton dumping fees paid by local garbage haulers. And so far, the haulers have passed most of these fee increases on to their customers.

The result: Trash bills for many Orange County residents--who now pay anywhere from $99 to $165 a year--have been increasing sharply since the recycling law passed, and could double, triple or even quadruple within the coming decade, experts say.

“Managing this waste stream is a monumental task,” said Supervisor Gaddi H. Vasquez, generally recognized as the board’s most respected voice on recycling issues. “I don’t think anybody (in government) aspires to say: ‘Thank you very much for participating in recycling. Now we’re going to raise your rates.’ Sure, some rate increases are going to be necessary, but we’re going to try to deal with them the right way.”

Vasquez is one of more than 70 people--public officials, garbage company executives, environmentalists, campaign finance experts and others--who were interviewed for this Times Orange County Edition investigation. The inquiry explored the wrenching changes that are being experienced in Orange County, as local governments here--like many throughout the nation--revamp their garbage systems to stimulate recycling.

Particularly on the spot are Orange County’s five supervisors, who not only control trash hauling rates in unincorporated areas through the awarding of exclusive franchises, but also set the landfill dumping fees that affect residential rates countywide.

At the same time, however, the garbage industry has played a substantial role in bankrolling the supervisors’ campaigns. The five sitting supervisors have received more than $135,000 in campaign donations from the trash industry in the past 15 years, according to a Times computer-assisted analysis of campaign disclosure records.

The supervisors say these contributions have not and will not influence the touchy decisions on garbage rates or contracts. But these political donations have drawn fire from campaign reform advocates and environmentalists.

They argue that the supervisors should not be cashing campaign checks from waste companies while making decisions critical to the industry’s future. Rather, these activists say, Orange County should do what several California cities have already done: ban donations from companies with county contracts.

If there was ever a time when the public needs reassurance that solid-waste decisions are being made free of outside influence, they argue, this is it.

Less Trash, Higher Bills

At the root of the landfill problem is a confounding paradox in the way this county and others pay for landfill operations.

The bill for running Orange County’s landfills is charged to haulers, who pay by the ton for the garbage they deliver for burial. Every bottle and can, every piece of plastic and stack of paper goods diverted by recycling therefore means less money to the county, which will not operate the landfills at a loss.

The result: To make up for the revenue loss, the county likely will hike the current $22.75 per ton it charges the haulers, and they will pass that cost on to residents. So as residents recycle more, they’re not going to get any good-citizenship refunds from the government. What they will get are sharply higher trash bills.

“The system has to change,” said Frank R. Bowerman, the director of Orange County’s Integrated Waste Management Department. “It can’t keep going the way it is.”

That’s not because the landfills are in trouble. The four county-owned and -operated landfills are modern, much admired by industry experts and will not be full for decades.

But the new statewide recycling mandate, known as AB939, has changed everything about taking out the trash.

That law, passed in 1989 with support from an unusual coalition that included environmentalists and the world’s largest waste hauler, requires that every jurisdiction in California recycle at least half of its waste by the year 2000 or face $10,000 a day in fines.

The law’s advocates, and even some of its critics, say it was badly needed to force a change in a society where every man, woman and child throws away on average more than six pounds of garbage a day.

The numbers in Orange County are more startling: People here discard more than 11 pounds of trash per person, per day, every day of the year. That makes Orange County one of the most wasteful places on Earth.

But much work remains to be done before AB939 can complete its mission. Markets must be found for the mountains of recycled material that the law will create. Regulators must protect consumers against dwindling competition if some haulers are forced out of business. And local governments must summon the courage to approve large rate hikes or find a way to operate their landfills at a loss.

“It’s very difficult to take a system that was based on the assumption that we can bury everything we throw away, and change that entirely,” said Brea City Manager Frank Benest, a member of the county’s Waste Management Commission. “All the assumptions are new, and we’re trying to change with them.”

Adds Mary Nichols, an attorney with the Natural Resources Defense Council: “AB939 was a wake-up call. Now we’re awake, and there’s a lot more to do.”

That’s certainly the case in Orange County.

The county garbage system is relatively simple. Although Newport Beach and the Midway City Sanitary District in central Orange County have public employees collect the trash, other cities and the county hire haulers to pick it up. Those haulers receive exclusive franchise agreements, giving them monopolies in a given area, much like a public utility.

Monopoly Control

They can be fired and the franchise put up for bid, but that’s almost never done. Under state law, governments must give a hauler five years’ notice before ending a contract, a requirement that helps hold down rates but makes it hard to change haulers.

Theoretically, it is competition that keeps the system honest; trash companies compete for the franchises and always risk being replaced if they fail to perform. But Orange County governments have preferred to renew their contracts while saying they are negotiating the best deal for residents.

But rate setting is difficult. Because the haulers are not public utilities, they resist most scrutiny of their books, officials say. As a result, no one really knows how much profit the companies make.

Once the hauler picks up the trash, most of it heads to one of the four Orange County landfills. About 10,000 tons of trash a day--more than 3 million tons a year--ends up in those dumps, enough to make this the third-largest landfill system in the United States.

In addition to the trash that makes it to the landfills, almost 2,000 tons a day are being recycled, some of it separated by residents, the rest by waste companies that sort the trash for their customers.

That means that a little less than 20% of the county’s waste is now recycled. By law, that must be 25% by 1995, increasing 5% each year until it hits 50% in the year 2000. Failure to do so carries with it the $10,000-a-day penalties.

But as the landfills get less garbage, the county gets less money.

According to one internal budget projection drafted by the Integrated Waste Management Department and obtained by The Times, Orange County landfill operations are heading toward bankruptcy. Unless dumping charges at the landfills are hiked or other fees imposed, the system could be $100 million in the red in just a few years. Other scenarios are less pronounced but they still show the system facing huge shortfalls.

“That’s what you call a reductio ad absurdum,” said Bowerman. “It shows the absurdity of the problem. Obviously, we can’t go broke, so we have to do something.”

County waste management officials have spent the past two years feverishly cutting costs, and expenses no longer are projected to rise annually, even with inflation. Personnel costs are only 10% of the department’s budget, and many other of its expenses are fixed.

Experts agree that state environmental mandates, the long-term costs of closing old landfills and debt service on existing ones make it nearly impossible for expenses to drop much further. Meanwhile, revenue is plunging off the charts.

That leaves the county supervisors with some unpleasant choices. They can watch their landfills go broke. Or they can keep raising rates as county residents recycle more. Or they can impose a new kind of fee, tacking part of the landfill costs to county property taxes or charging consumers by the can for the garbage they throw away.

“I won’t vote for those huge increases,” said Supervisor Don R. Roth, echoing the feelings of most of his colleagues. “I just won’t.”

Many environmentalists say that’s foolish.

“The biggest problem that we’re facing right now is that the old public works Establishment never viewed recycling as a viable solid waste management tool,” said Mark Murray, a spokesman for Californians Against Waste. “They’ve never crossed that line and budgeted for it.”

Nichols, of the Natural Resources Defense Council, agreed.

“The cost of a landfill is now artificially cheap,” she said. “The public cost of land-filling is much higher than what is being charged.”

Dumping or so-called “gate” fees--according to Nichols, Murray and other environmental experts--have never generated enough money to protect against chemicals that may eventually leach out of the landfills, fight air pollution that results from decaying material, clean up ground-water contamination and deal with other potential environmental hazards.

Environmentalists say that instead of including those costs in the annual landfill budgets, officials have pushed them aside, and only later paid for cleanups.

One effect of that has been to discourage recycling by making it so cheap to bury garbage. By raising the costs of land-filling so that they more realistically reflect its long-term social and environmental consequences, recycling emerges as a more competitive option, environmentalists say.

The solution, many believe, is as simple as it is unpopular: Raise the landfill dumping fees. Raise them a lot, and charge residents extra for trash that can’t be recycled.

Fee-Setting Headaches

That process is painful, especially for the politicians charged with carrying it out.

Gate fees have gone from $6.12 a ton in 1988 to $22.75 a ton today, and each increase brings howls of protest from city officials, who are forced to raise collection rates to keep up with the cost of dumping the garbage. Projections by the county waste management department show those fees will continue to rise during the next five years, hitting $31.55 in July, 1994.

It’s little consolation that Orange County’s landfill fees remain far below those charged in most parts of the nation.

On the East Coast, some landfills charge gate fees of nearly $100 per ton. Even some nearby rates make Orange County look like a bargain: Santa Barbara County charges haulers between $45 and $55 a ton for dumping in its local landfill.

“That’s a much more realistic rate,” Murray said. “They’re paying for the true costs of their system, unlike a place like Orange County.”

Brea City Manager Benest said the specter of whopping trash bills troubles everyone.

“This is a source of real concern to our residents,” he said. “They’re worried about the rising costs and the unpredictability of those costs. And we get caught in the middle between the customer and the company that provides the service.”

For many of those companies, however, the future is just as uncertain as it is for the local governments.

“We’re in the middle of a revolution in the history of trash,” said VerLyn N. (Sonny) Jensen, an Irvine attorney who represents Chicago-based Waste Management Inc., the world’s largest waste company. “Those companies who treat it as a revolution and plan for it will be here at the end of the decade. Those who do not will be gone.”

That prospect of a massive shakeout has rattled the hauling industry and, ironically, it has been fueled by recycling, which handicaps the smaller companies.

Tellingly, when AB939 was before the state Legislature, many small haulers were opposed, while Waste Management joined environmentalists in supporting it.

“The more environmental laws they pass, the quicker our company grows,” said Robert J. Morris, a vice president of Waste Management. But while Morris and other Waste Management executives insist that the future of garbage is big enough for everyone, some haulers are not so confident.

“That’s easy for them to say,” said Anthony M. Otting, president of 5-Star Rubbish, a small Costa Mesa firm. “The Waste Managements and the Western Wastes and the Browning-Ferrises, these guys are listed on the New York Stock Exchange. We’re just little guys. We fear for our businesses, our livelihood.”

The problem for smaller firms is that recycling forces companies to make huge investments in machinery. In particular, a relatively new type of complex called a material recovery facility--shortened to “Murf” in the business--may be a prerequisite for running a successful garbage business in the future.

Murfs are enormously expensive. It costs nearly $10 million to build a facility that can sort through about 2,000 tons of trash a day, and that’s just a fraction of Orange County’s waste. In a Murf, workers--usually aided by mechanical belts and automated sorting equipment--remove glass, newspaper, cans and other recyclables from the waste stream.

That helps cities and counties meet their recycling mandates, avoiding the state’s $10,000-a-day fine.

So governments turn to haulers who they believe can meet the recycling goals. And those haulers increasingly are likely to be the big firms that can afford the Murfs.

“The little guy can’t survive today,” said Raul Rangel, an executive of CR & R, a hauler that owns a major Murf in Stanton and is said to be discussing a merger with an independent hauler in South County. “There’s just no way.”

For now, that’s bad news for small haulers, but in the long run, it could hurt consumers too. If fewer haulers compete for the business, it means fewer potential bidders for franchises and less incentive for the surviving companies to lower rates.

Recyclables Pile Up

For the companies that do survive into the 21st Century, recycling will create another tier of issues, and they will forever change the garbage business in ways that experts can only guess at today.

Chief among the unknown elements in the new, recycled world will be what to do with all the products pulled from the waste stream. Who will buy the mountains of glass, cardboard, compost, aluminum and everything else that is not going to the landfills?

And who will get the money for selling it--the governments whose citizens it comes from or the haulers who pick it up?

“Those are very good questions,” said Vicki Wilson, assistant director of the county’s Integrated Waste Management Department. “Different areas are going to deal with them differently, but everyone’s going to have to address them as the recycling situation changes.”

Many of the companies that hold franchises in Orange County markets are able to sell the recycled material that they pull out of the trash. In some of the local franchise agreements, the haulers split the money from those sales with the government, but in others, the companies are obliged to reimburse the government only for costs. Whatever profit there is goes to the haulers.

The way things stand today, that doesn’t make much difference. Markets are scarce for most recycled materials, and it usually costs more to pull the recyclables out of the trash and ship them to a buyer than it would just to bury them.

Some municipal recycling programs--in places like Santa Monica and Santa Rosa--have enjoyed long success, both at culling out recyclables and also at finding markets for them. But none has ever achieved anything close to recycling 50% of the overall waste stream, as mandated by AB939.

That transformation will require more than just AB939’s stiff penalties, experts say. The new and more complicated task for lawmakers is to stimulate the market for recycled materials. Otherwise, tons upon tons of recyclables will simply pile up, waiting to be used.

Despite growing demand for some material--newspaper, clear glass and aluminum cans, for instance--that’s already happening in Seattle, where 6,000 tons of glass sit in a pile, without a buyer. It’s happening in Minneapolis-St. Paul, where material that was supposed to be recycled is being burned or dumped because no one will pay for it. It’s also happening in San Diego County, where tons of unwanted glass is being buried.

And that’s what could soon happen here, if recycling mandates create more material than industry can absorb.

Everyone involved agrees that new ideas or laws are needed to finish the job that AB939 started. That may mean enacting legislation that would require companies to use a certain percentage of recycled material in manufacturing or packaging. Or it may mean government incentives to encourage the use of those products.

In the meantime, however, recycling will not come cheap.

Higher rates at landfills will push up trash prices, and fewer bidders for government franchises could push them up even more. Financing for new recycling facilities could force them higher still. And that’s even before rising labor costs, fuel prices and maintenance expenses.

The real question is not whether Orange County residents will pay more for their diligence in recycling. It’s how much more. And the only honest answer is that no one really knows.

“We’re on the threshold of a major change in the whole system of solid waste in California,” said Bill Hodge, executive director of the League of Cities, Orange County Division. “It’s not enough to say that that’s a whole can of worms. It’s more like a roiling pit of snakes.”

The Costs of Recycling

Orange County, like all other California counties and cities, is under a state mandate to recycle at least half of its waste by the year 2000. As it meets that goal, the county will lose millions of dollars in fees from private garbage companies, which pay by the ton to use the landfills.

Recycling Projection (In millions of tons)

Amount taken to county landfills

1990: 4.17

2000: 2.59

2004: 2.78

Amount recycled

1990: .66

2000: 2.59

2004: 2.78

Plummeting Revenue

As more waste is recycled, the county’s revenue from landfill dumping fees drops. If current fee of $22.75 is not increased, the department operating the landfill will soon be in the red.

1995 (Projected): -$103.8 (In millions of dollars)

Soaring Fees

Dumping fees paid by haulers to the county--and passed on to consumers--have been rising sharply since the recycling law passed in 1989.

Amounts per ton of garbage

July ‘91: $22.75

July ‘94: $31.55

Source: Orange County Integrated Waste Management Department projections obtained by The Times. Although other scenarios vary, all show the same pattern: declining revenue as recycling increases.

The Garbage Bag

More than 3 million tons a year ends up in Orange County’s four landfills. What’s in our garbage in a single year:

* Orange County generates more yard waste than anything else; newspapers, by comparison, make up less than half our waste.

Yard waste: 733,442 tons

Wood waste: 591,998

Corrugated containers: 475,317

Newspaper: 342,079

Ferrous metals/tin cans: 304,665

* More than half the aluminum/tin cans and various metals in Orange County’s waste are recycled, the highest proportion for any of the discarded substances. The categories with the highest recycle rates:

Aluminum cans: 57%

Tin cans, ferrous metals: 55

Bottles with redemption value: 37

Newspaper: 33

High-grade ledger paper: 30

Corrugated paper containers: 27

Tires/rubber products: 24

* County residents, businesses and industrial concerns are more likely to toss out paper products than anything else. Various organic products, the second largest constituent of our total garbage load, makes up about one-fourth of the total.

Paper: 31%

Organics*: 23%

Yard waste: 17%

Metals: 9%

Plastics: 5%

Glass: 3%

Household hazardous waste: 1%

Other: 11%

* Residential, commercial and industrial sources contribute nearly equal amounts to the county’s total garbage picture.

Residential: 34%

Commercial: 29%

Industrial: 37%

Recycling in 2002

How will Orange County’s recyclables change during the next decade? Projections based on the unincorporated areas of the county indicate aluminum/tin cans and other metals will decline as a portion of the recyclables; yard waste and various organics will make up a larger share.

1992 2002 Paper 35% 32% Organics* 13% 19% Yard waste 31% 38% Metal 17% 7% Glass 3% 3% Plastic 1% 1%

* Food, rubber, wood, crop residues, manure, textiles, diapers, etc.

Note: Figures do not include heavy inert materials, such as rock, concrete, asphalt, and are based on a 1990 countywide study.

Source: Orange County Integrated Waste Management Department

Researched by JANICE JONES / Los Angeles Times

Hauling It In

Keeping a garbage truck on the road is an expensive proposition. A thumbnail sketch of a typical truck’s operations and costs:

Costs:

Purchase price: $130,000-$150,000

Gas and oil: $2,500 per month

Maintenance: $3,500 per month

Capacity:

Seven to 10 tons, depending on type of truck.

Makes about 330 stops before it is full.

Crew:

One or two workers per truck

Compensation: $33,000-$39,000 per year

Uniform cleaning expense: $5 per worker per month

Source: Anaheim Disposal

Orange County’s Garbage Cans

Orange County residents and businesses together produce more trash than almost any place on Earth; on average almost 11 pounds per day, per person. And while the four county-owned and operated landfills won’t be filled for decades, the statewide recycling law approved in 1989 requires that every jurisdiction in California recycle at least half of its waste by the year 2000 or face fines of $10,000 a day. Below are figures showing what residents threw away in 1990.

* Total Waste Percent **Pounds Per City Generated Recycled Person Anaheim 718,945 21.9 1,109 Brea 97,354 11.9 1,002 Buena Park 146,007 17.6 1,032 Costa Mesa 216,228 17.3 701 Cypress 80,516 7.4 1,121 Dana Point 53,210 4.8 1,023 Fountain Valley 111,675 10.5 1,484 Fullerton 241,725 10.8 1,188 Garden Grove 264,235 13.9 1,202 Huntington Beach 349,226 3.8 1,652 Irvine 272,572 11.6 658 Laguna Beach 55,951 12.4 1,395 Laguna Niguel 84,226 4.3 1,381 La Habra 86,808 11.9 1,103 La Palma 25,996 2.2 1,231 Los Alamitos 22,110 1.6 669 Mission Viejo 122,269 10.1 905 Newport Beach 196,394 9.7 1,079 Orange 291,655 13.6 1,923 Placentia 88,256 23.5 1,051 San Clemente 71,485 10.5 1,179 San Juan Capistrano 55,557 3.2 932 Santa Ana 527,529 17.0 846 Seal Beach 46,226 6.6 1,126 Stanton 65,829 29.2 413 Tustin 112,992 5.0 995 Villa Park 11,891 5.6 1,381 Westminster 111,143 12.7 971 Yorba Linda 105,962 18.1 1,785 Unincorporated *** 361,040 7.1 930 COUNTY TOTAL 4,995,052 13.2 1,112

* Does not include inert materials, such as concrete, asphalt and rocks

** Based on total residential trash generated, omitting commercial and industrial waste

*** Includes Laguna Niguel and Lake Forest

Source: Orange County Integrated Waste Management Department