Garbage Franchise Fee - House Bill 4344

Solid waste management operators who provide services in Houston profit from the use of the public right-of-way and have been paying 4 percent of gross receipts to the City of Houston for the use of the public asset since 2003. When the City implemented the fee in 2003, Houston did not set the fee arbitrarily. The City looked at other franchise agreements that spoke to the fair market rental value of the right-of-way.

House Bill 4344 by Rep. Phil Stephenson would have limited the amount the City of Houston could charge solid waste management service operators to 2 percent of the gross receipts of the franchisee for the sale of services in the municipality.

Under the proposed legislation, the franchise fees received by the City would be halved to only 2 percent and would reduce the City's revenue by approximately $4 million annually, directly impacting even the City's own solid waste operations.

To put this into perspective, the estimated fee reduction would be:

• Able to fund 72 full-time-equivalents making our median salary ($55,437); or
• More than the budgets of our municipal Solid Waste Department's drop-off, neighborhood depository AND recycling programs combined; or
• The equivalent of purchasing 14 new garbage trucks each year.

The Texas Constitution has long required value-based rental fees for use of public property. When Houston conducted its fair market rental review, the other franchise agreements were at 4 and 5 percent depending on the scope of use. The City invited stakeholders to draft the regulations. After several months of collaborative work, the City arrived at the Solid Waste Franchise structure and the 4 percent fee that is expressed in Chapter 39 of the City of Houston Code of Ordinances.

As a result of our inclusive work with industry members, the City of Houston currently holds franchise agreements with 237 waste-hauling companies that operate within the city limits. In the 16 years that this ordinance has been in place, Houston received no complaints from the industry or the public about the franchise fee rates or the services provided.

In addition to Houston, other cities in Texas collect franchise fees higher than 2 percent from solid waste haulers. The proposed bill dictated what all cities in Texas should receive in remuneration for a public asset, without any rational basis for limiting the franchise fee to 2 percent. This one-size-fits-all approach would have arbitrarily set the value of all municipal right-of-way for every municipality that currently has a franchise fee above 2 percent.

Texas cities spend billions of dollars each year maintaining the public right-of-way for the health, safety, and the benefit of all who use it.

The City of Houston testified in opposition to House Bill 4344 and the bill failed to pass the House Environmental Committee.