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Last year Los Angeles City Council gave a handful of companies control of trash and recycling pick-up for all businesses and apartment buildings in the massive metropolis. Now these same council members are acting shocked that eliminating market competition has led to price-gouging and poor customer service.
The City of Los Angeles has a citywide dumpster fire on its hands. In just the first six months of the new system, the city has received close to 30,000 service complaints. Some customers' trash bills have doubled or tripled. Citizens have launched a signature-gathering campaign to try to force a citywide vote to kill parts of the program.
This program, called RecycLA, was sold to city leaders as a way to shift more trash to recycling and away from landfills to achieve a 90 percent diversion rate by 2025.
What the program actually did, though, is deliberately eliminate all competition for trash hauling. The program divides the city into 11 massive districts. Every commercial or apartment building in a district is served by a single trash hauler, and some of these haulers control multiple districts. The landlords and residents have no choice: If they want their trash picked up, they must do business with whoever gets the city contract.
To land these contracts, the trash companies must meet a whole host of demands, including new natural-gas-powered trucks, city-determined "living wages" for employees, and labor peace agreements with local unions. The city also gets millions of dollars in franchise fees. All of this was clearly, obviously going to drive up the price of trash hauling in Los Angeles.
Now City Council members are just aghast that a cartel crafted to make environmentalists and union leaders happy ended up putting the screws to citizens. The Los Angeles Times notes that they seem rather surprised at how things have turned out:
Councilman Mitch O'Farrell, who represents neighborhoods from Echo Park to Hollywood, said he had received assurances that RecycLA would improve the "customer experience" for landlords, business owners and condominium complexes. "I feel I was sold a bill of goods," he said before Tuesday's meeting.
There is an entire field of study, called "economics," that could have shown O'Farrell that this was going to happen. The city deliberately reduced the supply of trash companies, but the demand for their services did not change. This allowed companies both to jack up prices and to provide lackluster services without having to worry about the customers turning to competitors.
Reason's Los Angeles office is among the many places struggling with their new trash companies. It charges an extra fee to haul our trash because we keep our dumpster locked up. (Our previous hauler had no problems getting access.) We've had to call and complain about missed pick-ups. We even had to send the company pictures of our dumpster to prove no one had picked up our trash.
Los Angeles city leaders were forewarned about all of this. I analyzed this plan way back in July 2014, after it was approved but before it was implemented. I warned back then it was going to drive up trash rates, and I wasn't the only one.
City Council members now are saying they may trash the contracts of some of these hauling companies if they don't step up their game, improve service, and cut back on the fees. But the RecycLA program had extremely expensive, front-loaded demands for trash companies to participate. It took years for all of this to actually be implemented, and in the process a bunch of small haulers were put out of business entirely. It's not like the city can just simply hand over responsibility to cover thousands of commercial and residential customers with a snap of a finger.
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