California local governments face financial and logistical challenges in organic waste recycling law

Editor's Note: This article is the third in a multi-part series exploring the market impacts of California's comprehensive organic waste reduction law, SB 1383.

Local governments are at the forefront of California's transition to comprehensive organic waste recycling. However, even those that have been advancing related efforts for years have found preparing for SB 1383 to be no easy task.

A key factor is the timing of the regulations. The law was signed in September 2016, but the final regulations, after multiple revisions, were not released until the end of 2020. These regulations were originally scheduled to be enforceable starting January 1 of this year, a timeline many considered too rushed, as some jurisdictions waited for final guidance before acting. Then, the COVID-19 pandemic brought additional shocks.

"Basically, cities lost a year and a half in moving forward with implementation," said Tracie Onstad Bills, Executive Director of the California Resource Recovery Association and Vice President at SCS Engineers. She cited an example of a city that had to pause its organic waste container distribution program during the week of March 16, 2020.

Today, readiness varies widely across regions: from Bay Area pioneers in organics recycling, to large cities still gradually rolling out programs, to small jurisdictions seeking targeted exemptions. Many localities already have residential organic waste programs, some driven by county or local policies. Yard waste collection is common statewide, and due to the earlier AB 1826 law (2014), jurisdictions were already preparing commercial organic waste collection, but many still have significant work to do. In recent months, local governments have been making far-reaching, multi-million-dollar decisions almost weekly.

At the end of 2021, Governor Gavin Newsom signed SB 619, providing local governments some breathing room before expensive compliance costs took effect. More jurisdictions have begun taking necessary steps, such as passing organic waste recycling ordinances, arranging collection and processing contracts, and initiating education and implementation efforts. Local jurisdictions also welcomed new funding in the FY 2023 budget, but costs remain a key issue, with SB 1383-driven changes causing significant rate increases in many cases. Despite these measures, full readiness for everyone may still take years.

"This is a massive undertaking. We're talking about the largest infrastructure deployment since single-stream recycling," said Yaniv Scherson, Chief Operating Officer of organic recycler Anaergia. "It takes time."

The Funding Challenge

Previous estimates from CalRecycle suggested that by 2030, the potential costs of implementing SB 1383 could reach $20.9 billion, with potential economic benefits of $17 billion over the same period. Since the law is an unfunded mandate, most of the economic impact falls on local jurisdictions and their ratepayers.

A November 2020 survey by the League of California Cities (194 respondents) found that most jurisdictions expected double-digit rate increases within the next three years. While multiple factors contributed to this expectation, including ongoing changes in recycling markets and processing costs, respondents cited SB 1383 and the need for organics recycling infrastructure as major factors. The organization recently sought feedback for an updated survey amid rising costs from inflation and supply chain factors, but indicated during this year's budget process that the trend continues.

Although CalRecycle acknowledged in its August 2020 progress report that the COVID-19 pandemic could affect local implementation capacity, the agency ultimately concluded: "To meet climate change goals and protect human health and the environment from the negative impacts of greenhouse gas emissions, California cannot delay implementation of SB 1383 or alter its diversion or compliance targets."

The general consensus among many industry professionals interviewed for this series is that, despite current economic factors, implementation of SB 1383 should not be further delayed.

"California is facing this pandemic crisis, which has evolved into an economic crisis. With commercial businesses closed, cities are seeing reduced franchise fee revenue. So, how do they implement organics recycling with reduced revenue?" asked Rachel Oster, Principal at Diversion Strategies, in the summer of 2021, who has been working with haulers and jurisdictions statewide to find creative preparation methods. "At the same time, devastating wildfires tell us these climate policies must be implemented now."

SB 619 delayed potential enforcement penalties against jurisdictions until 2023, provided they submitted a notice of compliance by March of this year. Penalties for jurisdictions range from $500 to $10,000 per day, depending on the scale of the violation. While the penalty delay was welcomed by local governments, its overall impact was not significant. Some noted that certain jurisdictions lagging in preparation chose not to apply for this consideration because it would require them to list specific dates for planned compliance. Regardless, the goal for all parties is to make progress as quickly as possible.

"Cities are absolutely doing everything possible to comply with SB 1383. SB 619 is not a get-out-of-jail-free card," said Derek Dolfie, Legislative Representative for the League of California Cities. "It didn't actually delay any implementation work. It just provides some penalty protection as cities kick off this massive undertaking."

The League has been one of the leading voices advocating for more local funding for SB 1383 implementation during the annual state budget process. CalRecycle, expressing understanding of the challenges faced by local jurisdictions, has previously touted that as of 2020, it and other state offices had provided $140 million in grants for organics recycling, edible food recovery, and related programs. Stakeholders continue to call for more funding.

In May of last year, numerous groups, including major industry companies like WM and Republic Services, sent a letter to Newsom calling for $400 million in budget funding through CalRecycle for infrastructure and implementation. Following a budget surplus, Newsom and state legislators ultimately allocated an additional $60 million for local organics recycling. This brought total FY 2022 funding for organic waste infrastructure and implementation to $168 million. Combined with FY 2023 funding, the total now stands at $348 million, but the gap remains significant.

Another pending bill, SB 45, would require CalRecycle to play a more direct role in providing financial assistance to local jurisdictions when the Legislature allocates funds. Although the proposal has support from figures like a Los Angeles city councilmember, it has not fully advanced.

This spring, the League of California Cities, along with waste agencies representing jurisdictions statewide and the local chapter of the Solid Waste Association of North America, co-signed a letter advocating for an additional $180 million in the FY 2023 budget for SB 1383 implementation. The group cited testimony from CalRecycle Director Rachel Machi Wagoner noting that the agency had received approximately 470 applications for the previous year's $60 million in funding—far more than it could support.

Speaking separately outside the hearing, Wagoner said her agency is working closely with jurisdictions, but implementation "ultimately is their responsibility," and she expressed optimism about the potential for further private sector investment.

"Many jurisdictions, especially given the pandemic, may be a bit behind where they'd like to be," she said. "I have a good feeling that within the next two years, we'll really reach, if not 100%, very close to 100% compliance rates."

Under a preliminary budget agreement recently finalized between legislators and Governor Newsom, CalRecycle will receive the full $180 million allocation from the state's Greenhouse Gas Reduction Fund.

Foundational Issues

While funding sources remain a key issue for jurisdictions, they also face financial and operational decisions affecting a wide range of stakeholders.

According to a 2018 CalRecycle analysis, SB 1383 "will affect all of California's approximately 540 jurisdictions; millions of households; thousands of businesses; hundreds of haulers, food recovery organizations; hundreds of material recovery facilities, processors, recyclers, landfills; dozens of local government environmental enforcement agencies; all schools, federal and state agencies, and some end users of recycled organic products."

The regulations allow jurisdictions to apply for exemptions from certain requirements based on factors such as population and elevation, and CalRecycle has reportedly received at least 500 such requests for specific areas. While the agency has approved dozens of exemptions on a rolling basis this year, it says the system was designed so that SB 1383's goals can be met regardless of exemptions, and the vast majority of state residents will still be covered.

For jurisdictions starting or refining programs, cost increases are largely seen as unavoidable. A 2020 report prepared by R3 Consulting for CalRecycle makes this point based on a survey of existing programs and future needs.

"Jurisdictions may not be able to fund the organic collection services required by SB 1383 without appropriate, potentially significant, adjustments to customer rates," the report states. "Jurisdictions should also be prepared to explain to employees and customers that, while rate increases are unpopular, they are an inevitable consequence of state-mandated organic collection programs."

At the time of R3's survey, green waste collection was the most common service jurisdictions offered to single-family and multi-family residential customers, followed by mixed organics services (collecting both food waste and yard waste). On the commercial side, dedicated food waste programs were most common due to the nature of the waste stream and existing requirements under AB 1826.

Nevertheless, multiple experts noted that cost is just one consideration for jurisdictions deciding how to comply.

Those with more mature programs may pursue the "performance-based" category under SB 1383, which requires a three-cart system with at least 90% access for residential and commercial customers, but fewer audits. This approach also requires an annual average maximum of 25% organic material discarded in the gray cart (the waste cart color designated by SB 1383 regulations). Even the most experienced local programs may not consistently meet this level. The more common path is expected to be "standard" source-separated collection, which allows a range of cart configurations but has more frequent audit and reporting requirements.

WM sees this as a key decision point for customers, determining the type of processing infrastructure they want to use (partly depending on regional options) and how the program rolls out. "If you're working with a city that already has high participation rates, a performance-based model might make sense, but 'most won't choose this,'" said Alex Oseguera, the company's Director of State Government Affairs.

Athens Services, one of the largest haulers and organic recyclers in the Los Angeles market, said some jurisdictions it works with will adopt the performance-based model. Executive Vice President Gary Clifford said SB 1383 has prompted many jurisdictions that used single-cart programs to now choose different options. Among the few clients sticking with mixed waste programs (Athens' specialty), two-cart collection has become the more common choice.

Clifford said Athens aims to tailor its approach to each jurisdiction, sometimes offering smaller rate increases that can be amortized over longer contract terms, because "we'd rather make a slow nickel than a fast dime." As a former mayor and councilmember of Glendora, Clifford said he understands the pressure local decision-makers face when implementing major state laws.

"Our elected officials support the law. They're not happy it's an unfunded mandate," he said. "We're really trying to help our elected officials have a 'taste' for accepting the law."

Regardless of the compliance path chosen, jurisdictions and haulers will need to pay more attention to education and contamination reduction strategies—not to mention other requirements related to edible food recovery and procurement, which are newer even for the most mature programs. While discussions continue about which approach is most effective long-term, and decisions made now could lock in for years, Dolfie said the primary priority for many League of California Cities members is simply ensuring basic requirements are met.

"We're all independent laboratories, and I believe some cities will find the magic formula that can be replicated statewide," he said. "The main goal for all our cities is to achieve as comprehensive compliance as possible, as quickly as possible."

Stay tuned for Part Four, which will delve into how local jurisdictions, from some of California's largest cities to more remote desert areas, are tackling SB 1383 implementation.