San Francisco LAFCO reviews rapid R3 study on refuse procurement; commissioners seek deeper fee, barging and contract analysis

The San Francisco Local Agency Formation Commission on April 13 received a rapid independent study of refuse collection, hauling and disposal that confirmed the city’s high diversion rates and broadly satisfactory service but flagged that San Francisco lacks a conventional, time‑limited franchise contract used in most Bay Area jurisdictions.

The 3‑week R3 study, presented to the commission by consultant Rick Hutchinson, reviewed procurement practices in roughly 95 jurisdictions across seven counties and found that 55% use competitive procurement while about 45% rely on legacy or non‑competitive arrangements. Hutchinson told the commission three large haulers — Republic Services, Recology and Waste Management — serve a majority of the surveyed jurisdictions, and that most peers document service standards and term limits in a written franchise or contract. “Unlike virtually every jurisdiction we studied, San Francisco uses a permit and license process and does not have a formal contract with a finite term,” Hutchinson said during the presentation.

Why this matters: commissioners said the distinction has budgetary and oversight implications. Melanie Nutter, director of the San Francisco Department of the Environment (DOE), provided a chart prepared after the report that, according to DOE staff, sums Recology’s direct payments and city‑received free/discounted services to roughly $29 million annually — about a 10.6% effective take when compared with Recology’s reported revenues. Robert Haley, the city’s zero‑waste program manager, explained that the figure combines direct fees (vehicle license, business taxes, permit fees) and in‑kind services (discounted disposal, city collection) documented in the rate‑setting record.

Recology, represented by company management, defended the current approach and said the city’s multi‑step rate‑setting process and rate order function as a de‑facto contract. A Recology speaker said the company operates about 110 jurisdictions and that franchise and fee arrangements vary widely; company representatives also described Pier 96 and other San Francisco facilities and said they are exploring options including Pier 80 and consolidated facilities that could reduce neighborhood impacts compared with some current transfer operations.

Commissioners pressed for more precise comparisons with jurisdictions such as Oakland and San Jose, questioned how the DOE’s 10.6% figure was calculated, and asked whether higher franchise‑fee equivalents (some jurisdictions collect up to 15% in comparable measures) might be appropriate for San Francisco. Hutchinson acknowledged the study’s rapid timeline and warned that some jurisdictions do not make detailed fee structures publicly available, limiting immediate apples‑to‑apples comparisons.

Barging and rail: the report included a high‑level review of barging and rail options. Hutchinson listed three concepts — barging recyclables to Oakland, barging compostables, and use of the California Marine Highway — but said R3’s work did not include a detailed environmental or cost model. Multiple port and maritime speakers at public comment urged LAFCO to drill deeper into barging and rail viability and highlighted potential reductions in truck traffic and port revenue opportunities.

Public comment produced a mix of perspectives. Ratepayer and good‑government advocates urged a thorough review and competitive bids; labor unions and the Chamber of Commerce cautioned against disrupting a system that stakeholders described as delivering high recycling rates and stable jobs. Several speakers echoed the DOE’s point that San Francisco’s system has enabled substantial recycling and composting infrastructure investments.

Follow up and next steps: commissioners declined to act immediately on the R3 report and asked the consultant to return with a more detailed analysis in about three to four weeks focused on (1) a clearer breakdown of franchise/fee‑equivalent receipts to the city and how those compare across peer jurisdictions, (2) an assessment of transfer‑station siting and asset ownership questions, and (3) a deeper review of barging and rail using memos recently provided by DOE. Chair David Campos also directed LAFCO legal staff to prepare a memo on two legal issues: how franchise‑type fee revenues may lawfully be used (general fund vs. restricted uses) and the precise scope of the 1932 ordinance’s permit language (whether permits can be non‑exclusive or allow multiple permittees on the same route).

No formal change to franchise policy or procurement was adopted; the commission closed public comment and agreed to reconvene on the item once the consultant and staff supply the requested supplemental work.