Garbage Biz in The Dumps

The weak economy thumps industry where trash is cash – Garbage goes as the economy goes.

And right now, that’s down: “I’ve been around and working since ’71 and I’ve seen a number of recessionary environments, but this one seems substantially worse than the others,” said Mike Sangiacomo, president and CEO of NorCal Waste.

San Francisco-based NorCal is the parent company of Sunset Scavenger and Golden Gate Disposal, which collect garbage, recyclables and compost in the city. By the end of 2008, Sangiacomo said, it was picking up 200 fewer tons of trash per day than in July 2006 in San Francisco. Half that decline came since March. Other local trash collectors report similar trends as slower business at hotels, retailers and restaurants reduces waste, the building slump cuts down on construction debris, and thriftier residents cram their trash into smaller, cheaper garbage cans.

For NorCal, less garbage equals less money. Revenue has dropped between 3 and 3.5 percent in the last three months alone, Sangiacomo said, further squeezed by a collapse in prices for the recyclables his company collects and then sells. Sangiacomo would not disclose 2008 revenue; in fiscal 2007, the company brought in $500 million.

After finishing a new recycling center at Pier 96 in August 2008, the company reduced projected revenue growth to 2 percent for its fiscal year, which began Oct. 1, 2008.

But even reduced expectations haven’t been realized, Sangiacomo said. As a result, the company is tightening its belt. NorCal, which employs 1,100 people in San Francisco and 2,200 companywide, instituted a hiring freeze in October and cut back on overtime. It’s hoping it can last without layoffs.

NorCal Waste charges commercial companies for the number of days and the amount of garbage they collect. Residents get charged by the size of their can: A small garbage can costs $18 or $19 a month, while a large garbage can earns the company $26 a month.

“We’re able to reduce routes somewhat, but not as much as you’d think,” Sangiacomo said. “Revenue is going down faster than the costs are.”

From July 2006 through December 2008, all waste, including recyclables and compost, collected by Sunset Scavenger and Golden Gate Disposal declined to 2,500 tons from 2,700 tons per day. The biggest decline came from retail businesses, followed by hotels and restaurants.

“If our occupancy goes down and the number of people showing up for events goes down, there’s going to be less waste,” said Michael Dunne, general manager of the downtown Hilton, who added that not having to put newspapers in front of unoccupied doors leads to a lot less waste generated by hotels.

While recycled materials make up an increasing percentage of that waste, commodity prices for the materials have tanked. NorCal Waste used to get more than $200 a ton for corrugated cardboard as recently as July, but in December the price dropped to about $25 a ton.

“Even though people were doing more recycling, they weren’t necessarily subscribing to a lower level of service,” Sangiacomo said. “That has now begun as people are more concerned about saving every penny they can.”

It’s the same story for Joe Garbarino, who has owned Marin Sanitary Services since 1955.

Marin Sanitary Service is collecting less trash from smaller bins throughout the North Bay. And it lost $200,000 from October through December at the indoor dump that normally accounts for 50 percent of the company’s revenue as fewer people pay to throw away larger household trash like old washers, dryers and refrigerators.

“As for people coming into the gate, normally we have 12 people in line,” Garbarino said. “We have two people right now.”

He said he has to cut back from processing material brought to the dump to five days a week from six. He might have to cut back further to four days a week, which will mean slimmer paychecks for his 240 workers, but would help him avoid layoffs.

“My most important job is to keep my men and women working,” he said. “They mean too much.”

Houston-based Waste Management Inc., which owns and operates 277 landfills and 354 waste collection sites, including some in the East Bay and on the Peninsula, declined through a spokesman to comment for this story, saying their Feb. 12 earnings report would reveal any effects of the recession on the company.

But Garbarino said of waste collection agencies: “We’re all in the same boat.”

Sangiacomo said the one bright spot in an otherwise dismal time is in the company’s composting program. He sells fertilizer the company produces out of food scraps for $10 to $12 a cubic yard to farms and wineries.

“We think there’s enough (organic material) in the San Francisco waste stream that we could double what we do,” he said. “And we believe we could sell every bit of that.”

Source: San Francisco Business Times

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