Whose garbage is this anyway? High court to decide.

El Pollo Loco Inc. recently devised a pilot program to recycle the plastic foam plates and cups it uses to serve its food at about 100 of its franchise restaurants in the Los Angeles area.

But the recycling plan "hit a brick wall" because 70 of the outlets were in cities with exclusive agreements with waste haulers, said Diane Hays-Hoag, brand manager for the Irvine-based restaurant chain.

These agreements "restrict an outside hauler from picking up trash," so the company El Pollo Loco hired to recycle the plastic could not take containers from those restaurants, she said.

Under the exclusivity agreements, the trash in those cities belongs to the trash hauler, so the plan to recycle the plastic foam "fell apart," Hays-Hoag said.

Next month legal briefs will be filed before the state Supreme Court in a case which could decide whether businesses or cities -- and the waste haulers they select -- own the trash.

The city of Rancho Mirage and Waste Management of the Desert, a subsidiary of Waste Management Inc., the largest trash hauler in the nation, are appealing a state court of appeals decision handed down on Sept. 1, 1992 which allows businesses in the city to sell recyclables to Palm Springs Recycling Center Inc.

The case began two years ago when the city and Waste Management sued Palm Springs Recycling, and a superior court judge in Riverside County issued an injunction in May 1991 stopping Palm Springs Recycling from taking trash from the city of Rancho Mirage.

The state Supreme Court is expected to rule in the next year, attorneys on both sides say.

At stake is the right of businesses to decide whether they want to sell their waste or throw it out in the trash, said Lynn Crandall, attorney for Palm Springs Recycling.

Jean Harris, city attorney for Rancho Mirage, said, "The waste hauler has an exclusive franchise with the city to haul all the solid waste in the city, which includes recyclables. What is at issue is the viability of this exclusive contract."

In addition to the case before the court, there is an effort by the Institute of Scrap Recycling Industries, a California association of recycling companies, to get a bill introduced in Sacramento to allow businesses to recycle their waste, said Gary Liss, executive director of the California Resource Recovery Association, a recycling coalition.

Businesses' "right to recycle" has become a hot issue up and down the state, Liss said. The issue is an economic one of who gets the revenues for the recyclables a business generates -- the business itself or the city and its designated trash hauler, Liss said.

In California, the garbage hauling industry generates revenues of $3 billion to $5 billion a year, Liss said. "There is a lot of money at stake," he said.

If businesses have the right to recycle, trash haulers stand to lose millions on the recyclables, which they can sell, as well as charging businesses a fee to recycle the waste, Liss said. In addition, what is not recycled is hauled away and waste haulers get paid by the ton.

Another factor driving the conflict is the trend among California cities to award exclusive trash hauling agreements in order to comply with the state recycling law, Assembly Bill 939, Liss said.

AB 939 mandates that cities divert 25 percent of their waste stream by recycling, source reduction, or composting by 1995 and reduce the waste stream by 50 percent by 2000. In addition, cities must report in detail the amounts of waste being generated, reduced and recycled.

Any city that fails to comply could pay a fine as high as $10,000 a day and fear of those fines have been the driving force behind pacts signed with trash haulers. Cities across the state have decided that awarding the waste to one hauler makes it easier to account for the waste and divert it from landfills.

Some may consider franchising to be "anti-business, but it is pro-recycling," said John Schoenberger, attorney for Waste Management of the Desert. "The franchisee is in a position to provide recycling services to involve the entire community," Schoenberger said.

Harris said since cities are held responsible for reducing the waste stream, they must take control of the waste stream and franchising is the "most efficient way." Expecting businesses to voluntarily recycle and report it to the city "has never worked historically and will not work in the future," Harris said.

The right to recycle "has been an issue which has evoked serious concern on the part of many corporations and businesses," said Chris Campbell, executive director of the Southern California Coalition for Pollution Prevention, a group of major corporations with recycling programs.

Many businesses are waiting for a state Supreme Court decision before charting a course of action for future recycling programs, Campbell said. The issue "potentially serves as a disincentive for businesses to explore creative ways to utilize their own waste stream," Campbell said.

"From our experience, franchising and waste hauler control is definitely anti-recycling," said Susan Fountain, environmental coordinator for the Southern California region for Nordstrom stores.

Nordstrom stores handle tons of cardboard and the company has invested a significant amount of money in compactors and other equipment to recycle the material. But in some California cities, the waste hauler, which has an exclusive agreement, has stopped Nordstrom from recycling, Fountain said.

Nordstrom is about "breaking even" on its recycling operation, but would have to pay money to get the hauler to take the garbage away, she said. "The hauler and the city said we have to sue them and pay their prices or we couldn't recycle," Fountain said.

She said another reason she doesn't like the exclusive agreements is that service often goes down and price goes up when there is no competition.

In Redondo Beach there have been more than 600 complaints about poor service and high prices since the city awarded an exclusive trash contract to Western Waste Industries almost two years ago, Fountain noted.

Joan Edwards, director of the integrated solid waste management office for the City of Los Angeles, said she has heard stories like Nordstrom's and El Pollo Loco's more and more frequently since cities began moving toward exclusive franchises.

That is one reason Los Angeles' draft plan to comply with AB 939, which will be released in the next month, provides for allowing businesses to sell their own recyclables.

It is more cost effective to allow businesses to sell their waste in the free market than to force businesses to recycle it in some government mandated program, Edwards said. Franchising "almost always sacrifices cost to the altar of government command and control," she noted.

Mary Nelson, environmental safety manager for Nissan Motor Corp. USA and chairwoman of the South Bay Businesses Environmental Coalition, said businesses should get involved in discussions of garbage contracts at the local city level.

Nissan was one of several Carson-based companies with corporate recycling programs that complained to the City of Carson when the council was considering awarding an exclusive trash pact which could have halted recycling programs the companies had in place.

Because companies complained, the city allowed ones with existing programs to be "grandfathered in" to the Carson plan, Nelson said.

Currently, several businesses in El Segundo are waiting to see what kind of trash contract that city council will award, said Jennifer Snyder, environmental specialist for toymaker Mattel Inc.

Mattel and other large El Segundo-based corporations served on a city task force which recommended that businesses wishing to recycle could do so. Mattel has even offered to help smaller businesses do accounting for their recycling programs, Snyder said.

"Now we're waiting to see what is going to happen," she said. "The worst case scenario is that we can only recycle a few things, that we'll have to pay for it and that service is terrible or sloppy. We want the free market system to prevail. It isn't proper business to be mandated on how to do our business."