Matthew Kotanjian’s great-grandfather started recycling milk bottles in downtown Los Angeles back in 1906. He eventually turned that enterprise into Aaa Rubbish Inc., a Bell Gardens waste hauling company that Kotanjian now runs.

The company has survived wars, recessions and competition from giant national waste haulers. But Kotanjian fears that a proposed franchise system for waste haulers could put his company out of business.

The system would create 11 franchise zones in the city of Los Angeles, each with one hauler. The rest of the 50 to 60 haulers who regularly collect trash from commercial buildings and apartments would lose their business in the city.

“Los Angeles represents 80 percent of our business,” Kotanjian said. “If we’re not selected as one of the franchise operators, there’s no way we could replace that amount of business in such a short time. That would be the end of the line for us.”

Under the current system, haulers must get a permit from the city, but then can contract with customers with no restrictions.

Kotanjian is part of a coalition of independent waste haulers and industry groups opposed to the franchise plan. They say it would mean the loss of hundreds of jobs at dozens of waste haulers that don’t win franchise contracts and get forced out of business. They also say the franchise plan would substantially raise costs for owners of apartments and commercial buildings – costs that would ultimately be passed to their tenants.

What’s more, franchise opponents say, the proposal is really about making it easier for unions to organize the local waste-hauling industry by kicking out small independent players and leaving only a few haulers to negotiate with. (However, some of the small haulers, such as Aaa, are already unionized.)

The opponents note that the franchise initiative now on the table originated nearly three years ago with the Los Angeles Alliance for a New Economy, a group allied with organized labor. They also point to support for the franchise proposal from Teamsters Union Local 396, which represents waste truck drivers, and the Los Angeles County Federation of Labor.

“This is an example once again of the city focusing on an issue to help an industry organize,” said Carol Schatz, chief executive of the Central City Association, which primarily represents downtown L.A. business interests. “This will benefit a few workers while increasing the cost for every business, every commercial property owner and thousands of apartment tenants.”

Jay Phillips, president of Local 396, said that an exclusive franchise system would not make it any easier to organize workers in the industry. Rather, it would clamp down on rogue operators and improve overall working conditions.

“It will heighten accountability in what has become a free-for-all system,” Phillips said.

‘Wild west’

Proponents say a franchise system is needed to bring some control and accountability to a waste hauling system they call the “wild west,” where cutthroat competition has kept a lid on wages, compromised safety and resulted in an inefficient system where trucks from different waste haulers often cross each other on the same block.

“You never know who will be picking up the trash at a certain location, so there’s no way for anyone to be held accountable,” said Greg Good, director of the waste management project for LAANE.

Good also said an exclusive franchise system with competitive bidding is the best way to ensure improvement in recycling rates for commercial and multifamily buildings.

The hauler coalition said the city can meet its recycling and oversight goals through a nonexclusive franchise system, where haulers pay franchise fees to the city, agree to abide with city conditions such as recycling targets and mandates to replace polluting trucks, but can still compete for clients anywhere in the city.

“The city gets to meet all of its solid-waste diversion requirements, gain additional oversight of workplace and safety standards, but also maintain competition and not go to a monopoly system,” said Sean Rossall, spokesman for the hauler coalition, known as Angelenos for a Clean Environment.

Residential trash collection isn’t covered by the franchise proposal; the city’s sanitation bureau runs that program.

The exclusive franchise proposal was scheduled to go before the five-member Board of Public Works on Monday. If the board approves the plan, it next goes to the City Council, which could then order city staff to start the bidding process for the 11 franchise zones. That could take a year or two.

Haulers shut out?

The plan would have the biggest impact on about 50 to 60 waste haulers with regular trash pickup routes serving commercial and apartment/condominium properties in the city.

There are 140 waste haulers with permits to operate in the city, but about 80 of those primarily specialize in collecting trash from construction, demolition and temporary sites, such as film shoot locations. As of now, those haulers are exempt from the franchise proposal.

Currently, four major haulers dominate the system with more than two-thirds of the total business: Waste Management Inc. of Houston, Republic Services Inc. of Phoenix, Athens Disposal Services in City of Industry and Crown Disposal Co. Inc. of Sun Valley.

The rest of the business is split among about 50 family-owned haulers such as Aaa Rubbish. Aaa collects trash from apartment buildings, restaurants, office towers and shopping centers from Boyle Heights to Culver City.

Aaa’s Kotanjian said he would bid for the work under a franchise system, but the prospect of losing the business is frightening. The company employs 17 people, mostly drivers.

“What happens if we don’t get the franchise?” he said. “It would not just be the death knell for the business itself, but also for many of our drivers. They aren’t all going to be able to go work for the franchise winner.”

Kotanjian, who runs the company with his father, Greg, and his brother, Phillip, said the irony is that his drivers have been members of Local 396 since 1989.

“If the goal here is to preserve and expand union jobs, well, we’re already union and some of our drivers would be thrown out of work,” he said. “I truly feel like we’re collateral damage here.”

Rising costs

Some building owners and operators throughout Los Angeles fear their costs will go up and they will lose some of the specialty services they have become accustomed to.

“We don’t have many of the standard metal trash bins that the big haulers require, so we would have to spend money on new trash bins if we go to a franchise system,” said Chris Scroggin, senior vice president of Prime Properties LLC, which owns and operates the massive Park LaBrea apartment complex near the Miracle Mile district.

Prime Properties would only be able to pass on a fraction of this cost to tenants. That’s because the 18 towers that contain nearly two-thirds of Park LaBrea’s 4,241 apartment units are subject to the city’s rent control, which prevents waste hauling costs from being passed on to tenants.

For commercial building owners, the chief concern is higher costs, which are already set to rise in the next couple of years with the closure of the Puente Hills Landfill. Franchise opponents cite studies comparing rates in local cities with franchise systems, such as Santa Monica, and cities with open competition. Those studies claim rates average about 30 percent higher in franchise cities.

“These kinds of fee increases will be extremely hard for building owners and tenants,” said Martha Cox-Nitikman, senior director of public policy for the Building Owners and Managers Association of Greater Los Angeles.

But proponents said a franchise system would standardize what are now wildly divergent costs.

“As a small business owner now under the current system, what are your rights when you’re next to a bigger neighbor that can cut a better deal with a waste hauler than you can?” said LAANE’s Good. “Under a franchise system, rates are scrutinized by the city, so you won’t have these huge discrepancies.”

However, franchise opponents said they prefer to let the marketplace set rates. If one hauler charges too much, the business or property owner can shop around and find another one that charges less.

Joe Doyel, administrative director and treasurer of the Emmanuel Baptist Rescue Mission in downtown Los Angeles, did just that. After the mission’s hauler raised rates, he threatened to go with another company. His hauler then lowered the price by more than 60 percent.

“I trust the power of competition more than government officials,” Doyel said.