Matthew Kotanjian’s business might be hauling waste but now he feels trashed by the city of Los Angeles.

Kotanjian’s AAA Rubbish Inc. of Bell Gardens, a 94-year-old family business he runs with his father, Greg, lost out in the bidding for one of the 11 waste hauling franchise zones approved by the Los Angeles City Council this month.

But it’s much worse for the Kotanjians than losing a bid opportunity.

Because the city is converting to an exclusive franchise system from an open market for commercial trash collection, AAA stands to lose about three-fourths of its business in a year’s time when the franchises kick in, Matthew Kotanjian said. The company has five hauling routes in the city, spread out from Boyle Heights to South Los Angeles to the Wilshire Corridor.

“We are potentially going to have to lay off more than half of our 18 employees,” Kotanjian said. “Or, if we can, sell the business.”

The Kotanjians are not alone. Dozens of small family-owned waste haulers face a bleak future after the city awarded 10-year franchises worth an estimated $3.2 billion to seven companies.

It’s the most sweeping change to the system for collecting trash from commercial and major apartment properties in the city’s history. (Trash collection from single-family residences and small apartment buildings will continue to de provided by city sanitation workers.)

For companies that have all of their work in the city of Los Angeles and lost out on the bids, the Dec. 9 council vote likely means they will have to shut down, said Ron Saldana, executive director of the Los Angeles County Disposal Association, which represents most of the trash haulers operating in the county. Some companies that have routes outside Los Angeles are busy now trying to sell them, he said.

Haulers that don’t rely as much on L.A. customers are likewise scrambling for business in other area cities and for a bigger piece of the construction and demolition market, which is exempt from the franchise system.

Matthew Kotanjian said AAA will certainly try to expand into these areas, but he said competition will now be extra fierce among all the companies that lost out on the city franchises.

Winners, losers

The council’s 13-0 vote represented the culmination of a four-year effort by labor unions and environmental groups to convert the current open market for trash collection at commercial and multifamily properties to a tightly controlled system of exclusive franchises. The city says the aim is to reduce the number of trips made by garbage trucks and more easily impose strict labor and environmental standards on the industry, all toward a city mandate to divert 90 percent of waste from landfills by 2025.

But there was opposition from business groups and apartment owners, who feared the plan would reduce competition and raise prices. Some small waste haulers also opposed the plan, fearing being shut out.

That was one reason Councilman Paul Krekorian voted against the franchise proposal when it was approved by the council two years ago.

“I was very concerned about the fate of the small waste haulers under this plan,” he said. “If they go out of business, that represents a loss of jobs.”

Of course, the conversion to a franchise system did create some winners. The seven haulers selected from a pool of 15 applicants are Athens Services of La Puente, CalMet Services of Paramount, Nasa Services of Montebello, Republic Services of Phoenix, Universal Waste Systems of Santa Fe Springs, Ware Disposal of Santa Ana, and Waste Management Inc. of Houston. Athens will service three franchise zones, while Republic and Waste Management will service two zones; the rest will each service one. Together, the seven haulers will pay annual fees to the city totaling $35 million for the exclusive right to collect revenues from trash pickup within their zones.

One of the winners, Ware, said it will be staffing up over the next year to handle the extra business.

“Being awarded a zone is indeed a prestigious honor and significant responsibility,” said Jay Ware, general manager and son of the firm’s founder. “It certainly raises our profile.”

With such lucrative contracts at stake, conflicts during the yearlong bidding process were inevitable.

In the closing weeks, one company that lost out, CR&R Inc. of Stanton, sent a protest letter to the council asking for intervention in what it believed was an unfair bid scoring process. CR&R was bidding for the harbor franchise zone that was awarded to Athens. Ultimately, the council disregarded the letter.

Kotanjian said he’s also considering a challenge. His AAA had tried to verbally negotiate a subcontracting deal with one of the major haulers that won a franchise award but to no avail.

“We made what we thought was a very strong bid and we’ve tried everything else we can think of,” Kotanjian said. “We’re very concerned now about our future.”