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Garbage In - Garbage Out
February 10, 2003

A little publicized proposed amendment to the Franchise Agreement between the City of Richmond and Richmond Sanitary Service is on the City Council Agenda for February 11, 2003.

The action has been touted by the administration as a win-win opportunity for the City to increase its General Fund revenue in the face of looming devastating cuts in state funding. The salient features appear to include doubling the Franchise Fee paid by Richmond Sanitary Service, Inc. (now a wholly-owned subsidiary of Republic Services, Inc.) from 2 1/2 % to 5% of gross annual revenue. This would result in the Franchise Fee increasing from approximately $190,000 to $380,000, based on a gross annual collection revenue of approximately $7.6 million. Republic is the third largest waste management company in the United States, with 151 collection companies in 24 states and Canada, 55 landfills and more than 80 transfer stations.

In return, Republic would receive a guaranteed rate increase through the year 2025 based on Consumer Price Index (CPI) adjustments of current fees. While this may seem inherently fair, a number of critics point out that the current Richmond rates, if competitively bid, would be much lower than they are currently, and that the CPI escalator would lock in unreasonably higher rates for decades.

Based on a presentation  by the West Contra Costa Integrated Waste Management Authority in December 2002, using a 2001 rate survey, Richmond residents pay $19.75 per month for a standard 32 gallon weekly service. This is 17% higher than the Bay Area average of $16.90 and higher than 73% of the cities in the Bay Area. But it is also 6% lower than the West Contra Costa County average of $21.02. There is even more disparity in business rates, with Richmond in the top 6% Bay area-wide and rates 47% above Bay Area averages.

An article in the February 6, 2001 West County Times stated "The announcement [of the Republic purchase of Richmond Sanitary] comes nearly two years after the Richmond City Council handed the company an exclusive franchise that locked Richmond customers into paying garbage rates higher than those charged by most Bay Area Haulers ... Most residential and business customers in central Contra Costa pay 30 percent to 40 percent less for solid waste collection than Richmond residents and businesses." The West County Times quoted Richmond city officials as estimating the company's 25-year franchise to have a value of $392 million.

Under a competitive bidding environment, Richmond Sanitary won a contract in Rodeo in July of 2001, to provide 32 gallon residential service for $14.75, some 25% less than it charges for the same service in Richmond.

Currently, the Richmond rates, as high as they may be, are locked in through 2007, subject only to COLA adjustments.

Former Mayor Rosemary Corbin cautions against the deal, saying "The ability to conduct a rate review is worth a LOT.  You cannot look the ratepayers in the eye and say that the current rate is fair, and therefore justifies just being increased automatically based on the CPI.  I am being told that Republic is promising to take 2 1/2% out of their profit to add to the existing 2 1/2% franchise fee (which comes out of the rates) to restore the 5% franchise fee.  That 2 1/2% for the general fund does not begin to compensate the ratepayers for their high rates.  You should notify Republic that you will conduct a comprehensive review of their rates next year, and that you will not extend their franchise any further.  When the agreement expires in 2007 it should be put out to bid."

The Richmond City Council has had a long and friendly relationship with Richmond Sanitary Service, a successful home-grown business with a long history of community participation and political involvement. Although many former employees of Richmond Sanitary, including members of the legendary Granzella family, still work for Republic, absorption of the business by an international conglomerate may change the political landscape and the way the company is perceived and treated in Richmond. This pending action will be first major test.