Trash and Cash

Small, independent garbage haulers have always had to battle the big companies, but now they have a new foe: the City of Miami

Eric Bohnenblost backs up his truck until it's just touching the long, bulky trash bin. At the moment he's collecting debris from a window-screen manufacturer in Opa-locka, though his job takes him all over South Florida. On a typical day, he could drive from a Miami fabric-cutting factory to a Broward subdivision or a high school in unincorporated Miami-Dade County.

The 48-year-old Nicaragua native doesn't drive a standard garbage truck, which compacts trash in the rear. He operates a roll-off truck, so named because it unloads large commercial garbage containers by sliding them off the vehicle's hydraulically operated "tail," as it's known in the industry. He's new to the business and hasn't learned the skills of a swingman, someone who can haul trash in the three most common ways: front-end, the standard back-end, and roll-off.

Bohnenblost jumps down from the Mack cab to make sure the truck is aligned with the trash container (in garbage-hauling parlance, it's simply called a box). This one is filled to capacity with construction debris. The container, grooved along its bottom, will be hooked by a cable to the truck and hoisted onto twin tracks that extend out from the tail. In another minute, the driver will raise the tail -- it can achieve a slope of nearly six feet from the rear of the cab toward the ground behind -- and winch up the container onto the truck bed. He'll drive the load to a privately owned landfill that accepts only construction and demolition material. The landfill, operated by Waste Management, Inc., is located in Medley, an industrial town near Hialeah.

Waste Management is the largest trash hauler in the United States. In addition to owning more than 300 landfills, the company hauls $6.7 billion worth of garbage in North America. Waste Management's climb to the top of the heap in the garbage industry is by now a South Florida legend. Company cofounder Wayne Huizenga entered the trash-hauling business in 1962 at the age of 25 with just one truck. Through a series of mergers and a canny entrepreneurial sense, he built his firm into a billion-dollar conglomerate. Then in 1984, when the company was at its zenith, he resigned. (Huizenga used a strategy he would later employ in video rentals and used-car sales. Like garbage, these were service industries with few, if any, dominant players. He sold stock in the companies to attract capital. Then, like snowballs gaining momentum in a downhill roll, the companies grew, buying out one competitor after another.)

In 1995 Huizenga returned to the garbage business, convinced there was room for still more consolidation, and began the cycle anew. He and his partners purchased 40 percent of the common shares and took the helm of Republic Services, then based in Atlanta. (Today the company headquarters are in Fort Lauderdale.) Republic soon grew big enough to go up against two other titans of trash: Huizenga's former company, Waste Management, and Browning-Ferris Industries, both of which are strong in South Florida, and both based in Texas.

Garbage is not the only industry touched by mergermania; the list ranges from banks and auto makers to bookstores and funeral homes. This past year in the United States, a record $1.6 trillion changed hands in mergers and acquisitions. In 1997 alone some 240 of the nation's 5000 solid-waste companies were absorbed, many of them taken over by the big three. In Florida the garbage industry is worth around $1.8 billion in annual revenues. The big three control about half the business in the state; some 300 other companies, down from 350 ten years ago, vie for the other 50 percent, according to industry analysts. The small haulers, who are being pushed aside, call the big fish "the majors." In turn some of the big company men derisively refer to the little haulers as "gypsies."

Miami has been open territory for the trash haulers for more than 30 years. Any stalwart who can navigate the bureaucracy to obtain the licenses and produce the approved equipment can compete for refuse. The city itself hauled commercial accounts until 1994, when it decided that collecting licensing fees from companies would be more profitable than collecting garbage. (It has retained the residential hauling service.)

Bohnenblost drives for a commercial hauler called MacPac Waste Services, one of the gypsy companies. He sets in motion the truck's hydraulic lift to raise the tail, then tilts it down in the direction of the container. As he does this, he inches the truck backward again and activates the winch that hauls the box up and onto the rear of the truck. The container is secured in less than three minutes. Time, after all, is money, and he has several more trips to make in Miami-Dade and Broward counties. Bohnenblost points the Mack's hood ornament, a silver bulldog, to the south, and the truck lumbers away to the landfill.

MacPac, with about a dozen employees, is owned by two brothers, David and Mark McWilliams, second-generation haulers. Their father, Leonard "Mac" McWilliams, started hauling trash in 1969. He bought a commercial route in Dade County from a couple of Italian guys, David says, and worked eighteen-hour days to make it pay. The Italians had come from the New York City area after they'd been driven out by the Mafia's stranglehold on trash collection there. In South Florida they found a niche, worked hard, and thrived. They confessed to the senior McWilliams, as he paid his last installment for the route, that they'd had doubts about his success. The 52-year-old McWilliams had previously worked as a shrimper and tour-boat operator on Miami Beach, and probably didn't have the mettle for the trash business, they'd reasoned. In those days garbage hauling involved much more physical labor than it does now. The trash was collected in 55-gallon drums, and Mac would roll them onto the truck, empty them, then dump the refuse out again at a private landfill.

"I loved it," recalls McWilliams, now 81 years old and slowed by the onset of Alzheimer's. "You were your own boss."

It also cost the haulers little to dispose of trash at the time. "Disposal was of minimal concern," David McWilliams recalls. "There were a lot of landfills and a lot of space." A twenty-cubic-yard box of construction debris, which in 1969 cost $1.25 to dump, now costs $130 to dispose of.

Those days are over. Environmental and space concerns now make it extremely expensive to operate a landfill. In the past ten years, the number of landfills nationwide has dropped from 8000 to 3000 as they've filled to capacity or been shut down, unable to meet stringent environmental standards. Many municipalities that were once in the landfill business are selling out to private companies that charge more for dumping, or tipping, as it's called in the industry. (Small haulers have long complained that when companies own landfills as well as haul garbage, they have an unfair advantage. And in recent months, the U.S. Justice Department's antitrust division has ordered Waste Management and Browning-Ferris to divest holdings in places where pending mergers would have allowed them to corner the market.)

Forty-two-year-old David McWilliams went to work part time in the trade at the age of fourteen. He and his brother were assigned the task of tamping the trash as it was loaded. The future seemed limited only by the degree of effort one put into it. "[Dad] left this business to me and my brother as an inheritance," he explains. "'You'll have to work for it,' he said, 'but you should do well.'"

And work they do. The McWilliamses often start their day at 5:45 in a storage yard in Liberty City, where they park their six trucks and many of their garbage containers. In the premorning darkness, using flashlights and the illumination that spills from the bay door of the garage where they refurbish old containers, they go over their aging fleet, checking the lights, oil, and tires. A few old hounds follow them forlornly, hoping for a pat or a handout. One of the most time-consuming and expensive aspects of their operation is keeping the equipment functioning. They save money by recycling old metal containers, which, when purchased new, can cost thousands of dollars. By 6:30 they've sent the trucks out. The brothers stay in contact with the drivers by cell phone throughout the day, directing them to different jobs. They rarely drive the trucks themselves anymore.

The McWilliamses compete against the majors by winning their customers' loyalty. Many of the same businesses have stayed with MacPac for decades. They've built a client base by offering rapid response and a flexible service that the larger companies cannot match. But the success the elder McWilliams dreamed his sons would experience has been more difficult to achieve than he could have ever imagined, and their days may be numbered. "My wife is begging me to get out," David says.

MacPac might be able to compete indefinitely, though, working with small accounts amid the giant haulers. (David McWilliams claims the company grosses between $85,000 and $120,000 per month.) If the brothers get tired, maybe they can sell to the majors for a gilded retirement -- the proverbial condo by the sea. (Some industry insiders estimate current buyouts can be as high as $20 million for every $1 million a company earns in revenue.) But instead of worrying about survival in an increasingly competitive environment, small haulers like the McWilliamses are gearing up to face a potentially deadlier foe: the City of Miami.

In the next few months, city officials expect to move forward with a plan that could eliminate even the ability to compete for commercial trash hauling. This past September Miami Commissioner Joe Sanchez surprised the haulers when he introduced an unannounced item into the commission's agenda: a call for a proposal to overhaul the commercial garbage business by initiating a "franchise" system "to provide more efficient and better service while creating economic benefits for the city and its citizens." As justification for the change, Sanchez claimed that "haulers do not have an incentive to clean up the city" and sometimes they don't pay their licensing fees.

The plan would carve Miami into districts, or franchises. Though the number of franchises has yet to be determined, each would be awarded to a single company, which would have exclusive rights to collect commercial trash there. In places like downtown and the Brickell corridor, the franchise could be worth millions.

Why transform the commercial garbage system? City officials say exclusive franchises would generate more revenue for the cash-strapped city, either by increasing licensing fees charged to the trash haulers or sparking a bidding war for the territories. (Miami already helps itself to a twenty percent cut of all revenue the haulers earn within city limits, but the total only amounted to $3.6 million in fiscal year 1998.) The new system would also be more efficient, city officials say, and it may include guarantees from the companies to improve city cleanliness, perhaps by helping to clean up after special events.

But the small haulers believe that only the majors will be able to compete for exclusive franchises because only they have the capital, infrastructure, and insurance to win the larger contracts. By using an exclusive franchise system, the city, they say, could essentially legislate the gypsies out of existence.

In the long run, one small hauler notes, it is probably inevitable that the majors will knock the little guys out, through acquisitions or competitive attrition. "But to knock him out without giving him a chance," he says, "that's wrong."

It's the morning before Thanksgiving. An angry group of more than a dozen haulers has assembled around a conference table on the second floor of the administrative building of the city's Department of Solid Waste. The gathering is just the first skirmish in what could be a protracted war. Although the language of the moment is couched in accommodation, compromise does not seem to be in the air.

A number of those gathered here today are members of the Dade Waste Haulers Council, a trade group for small haulers. Approximately twenty private haulers work within Miami city limits now, and about half that number are here today. A lawyer for the association is also present. David McWilliams has come; so have representatives from Waste Management, Browning-Ferris, and Republic.

Assistant City Manager Raul Martinez, a former Miami deputy police chief, opens the meeting. He admits that after 24 years on the force, garbage is new territory for him. He's only been on the job a few weeks. The franchise plan, he assures the haulers, is not a done deal. "We want input from you," he tells them. "If this is going to happen, what would you recommend? If at some point we decide it's not worth it, we'll go back to the commission and say it's not worth it."

The haulers seated around the table voice their concerns: What about their existing private contracts that the city's action would nullify? How will they be able to bid successfully against the majors? The new districts will be too large, and their own resources too small. And just what are the city's gripes about cleanliness and delinquent fees? Tell us now, they plead; we can work it out. If the majors win, they'll control de facto monopolies, the small haulers say, and businesses throughout Miami will inevitably suffer higher costs.

"If the decision is to go to a franchise, we cannot allow the lack of competition to drive up prices," Martinez acknowledges.

Luciano Isla, the attorney for the small haulers, expresses skepticism that his clients' comments will be considered in the decision-making process, but he pledges to cooperate. "We will work with you in this process up until the time we think it will [no longer] benefit both the city and us," he says guardedly.

Finally a representative from Republic addresses city staff in an attempt to end the proceedings. The meeting has turned into a "debating society," he complains, but is practically shouted down. The small haulers turn their attention back to the staffers and threaten to fight the franchise plan in the courts. (One hauler says later: "Where I come from, they call it racketeering. Here they call it franchising.")

Martinez announces a nineteen-day comment period, after which the city commission will hold a workshop to discuss the franchise plan. And as the meeting draws to a close, he issues a pointed advisement to the haulers: Respond or not, as you choose, but the process will continue. David McWilliams did send in his own comments. He described ways Miami could increase cleanliness and enforcement, and then ended on a tougher note. "I constantly get calls or hear about cases of injustices by customers held captive in the monopoly/franchise in their municipality," he wrote. "They want a way out, but the arrogant, price-gouging franchise holder has them in a stranglehold with nowhere to go."

There was more at stake than his livelihood, McWilliams tried to explain. "[F]ranchising the waste industry has led to a monopoly environment that promotes unfair business practices for all concerned. They absolutely kill competition and the free market. They restrain trade and promote price-fixing. They endanger small and minority businesses from starting up because they monopolize entire markets, making it possible for only those with millions or billions in public money to succeed. They promote greed and go against everything that America is supposed to be about."

Of the seven other haulers who responded, all but one rejected the plan. Even Waste Management, which has worked to build up accounts in Miami, refused to support the proposal. "[The company] is totally opposed to the idea of franchising by establishing 'exclusive service districts,'" wrote Tony Spadaccia, the corporation's South Florida division manager for sales and marketing. In fact the only major in support of the proposal has been Huizenga's Republic. Harold Carter, Jr., the company's director of government affairs in Florida, submitted comments that echoed the arguments of city officials who favor the exclusive franchises. (Carter registered with the city as a lobbyist in March 1998. His only listed expenditure for the year was $100 for golf in November with two city officials: Commissioner Joe Sanchez and his chief of staff.

Sanchez acknowledges that Carter tried to lobby him to favor the new system, but he maintains that complaints his office had received about current collection methods, not Republic, influenced his thinking. "The city doesn't have any control or accountability [under the current system]," he says. "I want to put [the franchise proposal] out for everybody. I don't want to punish any hauler."

Carter will only say that his company is "waiting to see how things shake out." Republic is already working in Miami under the names of Imperial Sanitation Services and Lazaro's Recycling, companies with which it recently merged.

Meanwhile Miami's solid-waste director, Clarance Patterson, insists that having exclusive franchise areas will produce so much savings that companies will be able to pay the city more, make more, and not increase costs to consumers.

"The city has the right to provide all [trash hauling] services," Patterson says in his office a few days after the meeting. "If the city wanted to say tomorrow, 'You are going to go out of business, and we are going to take it over,' they can do that. The ones who are threatening to sue, let them sue. It's a free country. If they want to pay their lawyers, go ahead."

Patterson, or Mr. P, as his staff knows him, has been involved in the garbage business for 39 years, mainly, he says, in the public sector as a city and county administrator. His ample girth is testament to his love of cooking. In fact he used to run a barbecue joint called Pat's on Biscayne Boulevard, and he talks about cooking in the same way he talks about garbage: with the voice of authority. Patterson claims the barbecue in South Florida doesn't measure up to that in Georgia, where he's from. The problem, he points out, is the chefs don't cook the meat long enough. They're too interested in volume over quality. He sees no irony here, even though that's an argument the small haulers use against the majors. "I would say they are two different universes," he contends.

Patterson has never hauled garbage, but no one in the Southeast knows as much about it as he does, he declares. "My 39 years in the business, [the haulers] can't bullshit me," he boasts. "I've been around too long. Too many haulers come and go in this business, and they're going to tell me, 'We can't gain nothing by this'? Bullshit! You can gain by it. I grant you that some of the small haulers, if they don't become more innovative, might lose some accounts in the city, but they don't have that many accounts in the first damn place."

Prices will remain low, he insists, because of the benefits gained from a consolidated route. Again, he points out, most haulers have accounts in other areas. Franchising in the city of Miami won't really put anyone out of business. All they have to do, Patterson offers, is merge and try to compete like the majors.

It's a few days after Christmas and Eric Bohnenblost has just picked up another box. The container overflows with debris, just the kind of messiness Krista Woods, the city's chief sanitation inspector, is trying to control. "The reason you get overflow conditions," she explains, "is that the businesses take the cheap way out." Instead of requesting the level of service his business really needs, the owner contracts for less.

A franchise system might guarantee that businesses contract for the level of service they really need. Still, she doesn't fault all the haulers. Service is uneven among them, she admits, but it's the integrity of the company, not its size, that determines who does a good job. In the past year, the City of Miami has begun to crack down, sending out a team of inspectors to ensure that business owners and haulers satisfy city garbage codes. Woods says the heightened scrutiny is already getting results. Fines can range from $50 for failing to mark a container with the hauler's name to $1000 for illegal dumping.

Near the Medley dump, where Bohnenblost will eventually leave his load, he passes MacPac's former yard, which the company rented from Imperial Sanitation Services until last year, when Imperial merged with Republic and the small hauler was told to leave.

In late December MacPac itself merged with another small hauler, Rainbow Waste Services. The McWilliams brothers are just getting back into commercial garbage service within the City of Miami, where until recently they only hauled construction waste. The senior McWilliams sold his garbage route in Miami to pay for his retirement. As part of the sale, MacPac signed a ten-year noncompete clause with the buyer, WasteX, and the clause has just expired. David McWilliams is hoping that the merger will do one of two things: make the company a more attractive morsel for a major to consume, or give it a better chance to compete. Unfortunately most of Rainbow's accounts are in the City of Miami and could be lost under the new franchise proposal.

McWilliams is doing everything he can to survive. He's not ready to give up the garbage business quite yet. "I've been doing it so long, it's in my blood," he says over breakfast in a small Hispanic cafeteria, the likes of which can be found all over Miami. The food is cheap and the atmosphere convivial, the product of a familiar clientele and a personal touch. It's 11:00 a.m. and the hauler is halfway through his workday. His face is creased with worry. He points to this restaurant as the kind of place that might be driven out of business if garbage rates, a significant budget item, start to rise.

He wonders if there's any room for the little guy anymore. "They say it's not personal, it's just a matter of money. Well, it may not be personal to you, but it's personal to me and my family," he says. "This has a lot to do with freedom. I am being told that because I don't have a billion dollars of someone else's money, I can't be in business.

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