Waste-hauling costs are increasing and recycling policies are becoming stricter. Apartment operators are seeing the effects and are taking a variety of steps to improve efficiency and cost-effectiveness. In Part 1 of this 13-part, in-depth report, we explore overall bottom-line cost trends for waste hauling.

Sorting trash at the site level has never been so important – and challenging – because contamination fees top haulers’ complaint list. Greater scrutiny of what can and cannot be recycled moved to the forefront when China announced its “National Sword” or “Green Sword” policy in January 2018. It stated that it no longer would accept 24 types of solid waste, including various plastics. The policy also set a much tougher standard for contamination levels – meaning it would not accept shipments that are mixed with trash, the wrong type of recyclable or low-quality recyclables such as greasy paper goods (such as pizza boxes) or oblong containers like individual yogurt cartons.

Whereas China had been accepting “recycled trash” that comprised as much as 25 percent in contaminated materials, that threshold was reduced to a meager 0.5 percent. Anything above that rate would be deemed trash. With China no longer serving as a trash “buyer,” the economics of recycling were greatly affected and the ramifications continue.

Translation: Apartment communities’ bins require far greater scrutiny, because in some cases, depending on the hauler (each hauler has a slightly different approach to billing contamination fees), if truck drivers notice plastic bags or other items that are clearly contamination, a few things could happen depending on how severe the contamination. For smaller amounts of contamination, the driver will empty the bin into his truck and may charge a smaller contamination fee. If the bin has a high percentage of contamination, the driver is forced to skip the pickup (to avoid contaminating their entire truckload of material) and have a trash truck routed to pick up the bin as trash (not recyclables), in which case, a higher contamination fee may be accessed.

“We are seeing higher contamination fees,” says Ashley Cook, Director Ancillary Services, Bell Partners. “It’s a result of the China situation and plastic bags clogging up and slowing down the sorting machines. Contamination fees are a growing problem. I’m hearing of communities that have been hit with $500 in contamination fees per container.”

Bozzuto says in 2018 it saw a consistent rise in equipment and hauling costs across its managed portfolio.

“Tipping fees for landfill tonnage are increasing because China is refusing contaminated recycling,” says its Director of Sustainability, Peter Zadoretzky. “Nationally, we’re seeing those costs being passed to the customer and a consolidation of hauling services because local haulers can’t stay in business. The most severe spikes are in cities with robust waste diversion commitments (namely, New York City and Boston).”

Kevin Villont, Vice President of Construction and Maintenance, JVM Realty Corp., says he’s seen significant increases in recycling charges as well as much more stringent enforcement of recycling contamination fees.

“Many haulers have also implemented new fees to attempt to offset their rising disposal costs of these materials,” Villont says. “Again, this is a nationwide trend and not isolated to one region or municipality.”

Some markets are faring better, at least so far.

Mike Beirne, Executive Vice President, Kamson Corporation, which operates apartments in New Jersey’s uniquely regulated waste management culture, says that the Northeast, with the exception of Maryland, has not seen rates change demonstratively, “but enforcement is getting tighter.”

Ian Mattingly, President, LumaCorp, says the competition for waste management contracts has been “fairly fierce,” in Texas, which has helped to keep rates moderate.

“Roughly half of the major municipalities have monopoly contracts with national waste haulers,” Mattingly says. “So in unregulated markets, we have seen 5 percent to 10 percent annual increases this past year, which is down from the prior two years. I think most of the rate increases are driven more by fuel costs in Texas, as landfill space is still cheap and is relatively abundant.”

Pinnacle reports that outside of a few select markets, its waste costs have remained relatively stable.

“However, there are indications that rates will be rising as our economy grows stronger,” Raymond van Beveren, Senior Vice President, Construction Services, Pinnacle, says, “Water, sewer and trash collection CPI indexes have steadily increased year-over-year. We are aligning with our waste partners to mitigate that risk and keep our portfolios’ waste budgets in line with stakeholder expectations.”

Mark Delisi, Vice President of Corporate Responsibility at AvalonBay, says the China decision has upset the economics of waste collection in so many ways in so many markets.

“At the end of the day, communities are feeling the end result of increased trash and recycling fees,” he says. “And given this situation, we are now in, we’ve had to rethink our strategies to achieve our corporate disposal goal. Fundamentally, we still believe that our 20 percent reduction in landfill-bound waste is the right way to go, and we are making incremental progress in California and select East Coast markets, but it will be more difficult than anticipated and really relies on strong resident participation, education and engagement.”

Bell Partners’ Cook finds that drivers won’t pick up for recycle containers if they see non-recyclable materials in the container.

“The drivers won’t look through the entire container, but they will focus on plastic bags, especially those placed near the top of the container in plain sight,” Cook says. “If they see a plastic bag filled with recyclables, they skip the pick-up and then call for a separate pick-up of “regular” trash and charge a contamination fee.”

Prometheus Real Estate Group operates in California, Oregon and Washington. Its Director of Ancillary Services Mary Nitschke says she is seeing steady cost increases for fees.

“Typically they are up 10 percent to 12 percent, but in some instances there have been 30 percent increases,” she says. “Contamination fees as a result of China’s decision can be as much as 5 percent of our bill—which triggers a variance on our financials. Our worst fee hikes are occurring in Oregon and our worst contamination fee hikes are in California’s Bay Area.

“In addition to fines for contamination and overflow, some haulers have refused to pick up contaminated waste. Additionally, in the City of Sunnyvale (Calif.), if you have repeated violations of contamination, they take your bins away. In these cases, contamination isn’t defined as trash in the recycling bins, it is having improper recycled material in the labeled bins. For example, a bin labeled ‘Mixed Recycling’ cannot include cardboard. Mixed recycling for them is defined as plastics and cans and ‘Paper’ bins are for cardboard. It is easy for residents to get confused and easy for contamination to occur.”

Alpha Barnes Real Estate Services, based in Texas, operates 20,921 apartment homes, with communities also in South Carolina, Oklahoma and Arkansas. Its Vice President Cathy Johnson says the deregulation of waste management in Texas a few years ago has had effects on her portfolio—causing her company to pay more attention to invoicing.

“Haulers began to include extra charges for things such as leaving the lid open on trash containers,” she says. “But they did not have evidence such as an image stamped with the time and date. We’d see charges of $75, $225 or even $300 for things they could not substantiate.”

And then there is Camden, which has taken a hard line on contamination fees from the get-go. It’s paying off.

“As far as Camden is concerned, today, costs for waste hauling are as flat as I’ve even seen; and I’ve been in this business for 30 years,” says Rick Pippin, Director of National Purchasing, Camden.

“About seven months ago, we started seeing contamination fee charges on our bill. Altogether, it amounted to about $23,000 worth—or around $100 per load. We paid it, but we then requested a refund for all of it and we’ve gotten back every dime. Contamination fees were not part of my contract originally. I spoke to each of them directly and told them we would not be paying this fee. The refund process from request to payment took 45 to 60 days. I’m part of a networking group in our industry for people who handle waste management. When I told them seven months ago that I wasn’t going to pay these fees, most of them laughed at me. They aren’t laughing anymore.

“I told our haulers that if they wanted to include them during their contract renewal, we could talk about it. None did. For 2019, I’ve bid to every market except Washington, D.C., and South Florida [and I’ll be doing those shortly]. I’m fairly certain that haulers in both of those markets won’t include them, either.”

The charges are not exclusive to rental housing. Vickie Leith, Portfolio Manager, National Realty Partners, Herndon, Va., manages 90 communities in Northern Virginia, mostly single-family homes and townhomes.

“We’ve seen neighborhoods’ fees rise from $14 to $19 per house,” she says. When that happens, we re-bid. You have to. We advise homeowner groups’ Board of Directors to be careful with the contract. Haulers will include rollover clauses where there is a very short window when the community has to decide if they will renew, or it automatically renews for up to five more years. Contracts will include pass-through rate hikes based on things like fuel cost, but only within reason.”

Back to the Trash Talking in-depth report or read the part 2 story: Hauling Contract Term-Length Critical in Negotiations.