Incentive Programs for Local Government Recycling and Waste Reduction

Case Study: San Jose

• Residential System
• Commercial System
• Disposal Facility Tax
• Landfill Permit Conditions

San Jose has long been a pioneer in the use of economic incentives to achieve its waste reduction goals. The city has adopted rates, fees, and taxes that are structured to encourage waste generators to reduce their waste as much as possible and to recycle or compost the rest.

Residential System. San Jose implemented its "Recycling Plus!" system for integrated solid waste, recycling, and yard waste collection services in the residential sector on July 1, 1993. This system has been tremendously successful, achieving a 60 percent waste diversion rate for single-family households. Overall, the city has achieved a 47 percent waste diversion rate.

Since the start of the Recycling Plus! system, 86 to 87 percent of San Jose residents consistently has paid $13.95 per month for a 32-gallon garbage cart and unlimited recyclables collection. Another 13 percent pay $24.95 per month for a 64-gallon cart, and 1 percent pay $37.50 per month for 96 gallons of service. Residents may buy extra trash stickers for $3.50 each to attach to 32-gallon trash bags set next to their normal garbage cart when they have extra wastes. The city instituted this aggressive pay-as-you-throw rate structure along with a citywide yard waste collection service and added a wide range of other recyclable materials to its curbside collection program. (See details in U.S. EPA study listed in references).

Of particular note in the Recycling Plus! system is the structure of contractor payments. San Jose told bidders that it wanted them to make their profit on this contract from recycling, not garbage, and the city structured the its payments to contractors to accomplish that.

San Jose actually capped the amount of costs that bidders were to recover from fees per household at 80 percent of their estimated total system costs. Proposals varied significantly in how they responded. Western Waste (now WM) proposed $6.64 per household per month and $58.38 per ton for every ton they documented they recycled. GreenTeam of San Jose proposed $5 per household per month and $270.10 per ton recycled. These "recycling incentive fees" have escalated over time to the current $60.02 per ton for WM and $277.80 for GreenTeam.

The recycling incentive fees have provided a strong incentive to maximize recycling to the haulers. In addition, contractors must pay their own disposal fees for wastes not recycled (about $30 per ton), encouraging them further to minimize landfilled wastes. Finally, the city lets the contractor keep all the revenues from the sale of recyclables (which has varied between $50 to 60 per ton average for all the materials recycled).

Commercial System. In 1993, the commercial sector generated about 65 percent of the total waste stream in San Jose. As a result, the city adopted a number of policies, rates, fees, and taxes to encourage businesses to increase their waste diversion efforts. San Jose actually eliminated the exclusive franchise it had for commercial garbage (putrescible wastes) collection, to encourage greater experimentation by entrepreneurial waste and recycling firms in composting of food wastes and the recycling of all commercial wastes.

San Jose adopted non-exclusive commercial franchise fees for all commercial haulers consisting of 30 percent of gross receipts on all commercial solid waste set out for disposal to landfill. An additional AB 939 fee is levied on generators and included on bills provided to customers from commercial haulers of 28 percent of gross receipts. The total hauling fees paid to the city are 58 percent of hauler gross receipts. These levels were set to generate sufficient revenue to cover the costs of city programs and to encourage businesses to avoid these costs by recycling.

No franchise fees or AB 939 fees are paid on source-separated recyclables. As a nonexclusive system in the commercial sector, generators can select any franchised or permitted hauler. In addition, businesses generating less than one cubic yard of material for disposal per week can apply for residential garbage and recycling service.

San Jose’s source reduction and recycling element (SRRE) outlined a phased approach for San Jose commercial waste reduction policies:

1. Information. City guides and technical assistance to businesses and recyclers sharing information with the city about how much they recycled.
2. Incentives. Economic and policy incentives to encourage businesses to reduce waste and recycle.
3. Mandates. Requiring all or portions of the commercial waste stream generators to do more to recycle. Options include landfill bans for particular commercial materials (e.g., corrugated paper), requirements to recycle at certain levels of diversion, and/or requirements to plan for recycling.
4. City services. If all the above failed, then the city would consider whether it had to reinstitute an exclusive franchise system for commercial wastes, or to provide some or all of the commercial solid waste and recycling services needed to increase waste diversion in this sector.

To date, the city has decided only to work on the first two levels of this strategy. Staff are working to provide information and technical assistance and encouraging business waste reduction through economic and policy incentives.

Disposal Facility Tax. In 1987 San Jose revised its business tax for landfills to better reflect the type of business activity at the landfill. Rather than charging the operators on the basis of the number of employees (as it did with most other businesses), the city decided to charge landfills in San Jose on the basis of the amount of garbage buried in the landfills. The city initially set the charge at $2 per cubic yard, measured by annual aerial surveys. After problems the first year with the volumetric measurement, the city changed the tax basis to $3 per ton and required all landfills to provide scales. Now called the Disposal Facility Tax, the charge is $13 per ton.

Although established to raise money for the city general fund, this tax has also encouraged businesses and residents that haul their own materials to the landfills to further reduce their wastes. In addition, the Disposal Facility Tax is structured to provide an incentive to the landfill operators to maximize their waste diversion on-site. All materials recycled or beneficially used are deducted from the tax obligation of the landfills to the city.

Landfill Permit Conditions. San Jose has four landfills operating within its borders: Zanker Road Landfill (independent), Newby Island Landfill (BFI/Allied), Kirby Canyon (WM) and Guadalupe Mines Landfill (was independent, now WM). Solid waste facility permits written for three of the four landfills in the 1980s required them to assist in meeting the city’s waste reduction goals as a condition of their permits. The fourth facility had grandfathered permits, but was required under its disposal agreement with the city to help meet the city’s waste reduction goals.

Permit conditions contained in one or more of the permits included:

• Source separation discounts. Landfills were required to offer lower rates to generators for clean, source-separated materials to enable landfills to more easily recycle those materials.
• Use compost for cover material.
• Provide areas for salvaging, drop-off recycling and composting on site.
• Distribute public information on recycling.
• Assist the city’s solid waste program to meet its waste reduction goals.
• Conditions included in the 30-year disposal agreement for the Newby Island Landfill are:
• Provide a recycling center at least 7.5 acres in size
• Use compost as cover material.
• Allow the city to unilaterally decrease its put-or-pay commitments to the landfill by 25 percent in response to recycling and waste reduction initiatives.
• Provides a process for negotiating even lower waste flow commitments by mutual consent.

One of the landfills in San Jose (Zanker) particularly embraced the goals of these permit conditions and researched alternative technologies to implement at their facility. Zanker’s permits restrict it to receive only nonputrescible wastes. Over the last five years, Zanker diverted 94 percent of all wastes entering its facility.

Next>  Local Government Challenges and Opportunities  

Table of Contents | Innovations Home | Library Home

Last updated: October 26, 2007