Budget and Legislative Analyst complicates Recology's effort to expand its waste disposal monopoly in San Francisco
A newly released report from the Budget and Legislative Analyst has thrown a curve ball at the Department of the Environment's proposal to transport the city's garbage by truck and rail to Yuba County for disposal in Recology's Ostrom Road landfill.
Recology's proposal would kick in when the city's disposal contract with Waste Management's Altamont landfill reaches its 15 million ton limit, which is anticipated to occur in 2015, or beyond (see "A tale of two landfills," 06/15/10). But as that much-anticipated proposal finally comes to a Board of Supervisors committee on Feb. 9, the debate has suddenly been significantly broadened.
The Budget and Legislative Analyst's report recommends replacing existing trash collection and disposal laws with legislation that requires competitive bidding on all aspects of the city's waste collection, transportation, and disposal system. It also recommends that the Board of Supervisors require that refuse collection rates for both residential and commercial services be subject to board approval, and that competitive bidding could result in reduced refuse collection rates in San Francisco.
The annual cost to ratepayers of the city's entire refuse system is $206 million, but only the landfill disposal contract, worth $11.2 million a year, gets put out to competitive bid, the BLA observes.
Debra Newman, an analyst with he BLA, told the Guardian that she has been asked why she brought up all these issues in advance of the Board's Feb. 9 Budget and Finance committee hearing to discuss the Department of Environment's recommendation that Recology be awarded the disposal contract. The company already has a monopoly over collection and transportation of waste in San Francisco thanks to an 79-year-old voter-approved agreement.
"Our position is that this is the only opportunity to address these issues with the board because of the way the city's 1932 refuse collection and disposal ordinance reads," Newman said. "This is the only vehicle we would have because nothing else is going to come to them. The residential rates don't come to them, the commercial rates don't even come to the Rate Board. This is our chance to discuss the whole kit and caboodle of waste collection, transportation, and disposal."
The BLA's Feb. 4 report notes that "Unlike water rates charged by the SF Public Utilities Commission, neither residential or collection rates are currently subject to Board approval, under the city's 1932 refuse ordinance."
Residential rates are approved by the director of Public Works, unless such rates are appealed, in which case they are subject to the approval of the city's Rate Board, which consists of the city administrator, the controller and the SF Public Utilities Commission director. Recology sets the commercial rates, which are not subject to city approval.
Voters previously rejected two attempts to allow for competitive bidding for refuse collection and transportation (Prop. Z in 1993 and Prop. K in 1994). And the BLA observes that if the Board doesn't go to the ballot box, it could ask DoE to analyze costs and benefits of using Recology to collect refuse, and using a separate firm to provide transportation, if that firm can avoid transporting refuse through San Francisco's streets.
Under the never-ending waste ordinance that the city approved during the Great Depression, 97 permits exist to collect refuse within the city, and only authorized refuse collectors that have these permits may transport refuse "through the streets of the City and County of San Francisco." Due to a number of corporate acquisitions, Recology now owns all 97 permits and so has a monopoly over refuse collected in and transported through the streets of San Francisco.
But the BLA report was unable to identify any portion of the city's 1932 refuse ordinance that governs the transport of refuse that does not occur through the city's streets.
"Therefore, it may be possible for a second firm, other than Recology, to transport refuse after it has been collected by Recology, if that second firm's transfer station was located either outside the city limits or was located near marine or rail facilities, such that refuse from the transfer station to the city's designated landfill could avoid being transported through the streets of the city and county of San Francisco," the BLA states.
"These are nuanced issues and they've evolved," Newman observed. "All we are doing is trying to help the board try and decide what to do on this matter. We are saying that the current approach is a policy matter for the board, and recommending that the board submit a proposal to the voters to amend the refuse collection and disposal ordinance."
The BLA report comes 15 months after the city tentatively awarded the new landfill disposal agreement to Recology to deposit up to 5 million tons of waste collected in San Francisco in Recology's landfill in Yuba County for 10 years. The award was based on score sheets from a three-member evaluation panel composed of City Administrator (now Mayor) Ed Lee, DoE Deputy Director David Assmann, and Oakland environmental services director Susan Katchee.
The trio scored competing proposals from Recology and Waste Management, and awarded Recology 254, and WM 240, out of a possible 300 points. Lee's scores in favor of Recology were disproportionately higher than other panelists, and the BLA notes that the largest differences in the scoring occurred around cost.
The BLA concluded that the city's proposed agreement with Recology was subject to the city's normal competitive process, "because the landfill disposal agreement is the sole portion of the refuse collection, transportation and disposal process which is subject to the City's normal competitive bidding process." And it found that because the transfer and collection of the city's refuse has never been subject to the city's normal bidding process, approval of the proposed resolution is a policy decision for the board.
But while DoE's Assmann has said that California cities must maintain a plan for 15 years of landfill disposal capacity, the BLA notes that such plans can include executed agreements and anticipated agreements. And WM officials confirm that Altamont has capacity for 30 to 40 years. This means the board need not rush its disposal decision.
The BLA report comes against a backdrop of intense lobbying around Recology's proposal. Records show that in 2010, Alex Clemens of Barbary Coast Consulting recorded $82,500 from Recology, and Chris Gruwell of Platinum Advisors recorded $70,000 from Waste Management to lobby around the city's landfill disposal contract.
And now both firms continue to press their case in face of the BLA report.
"Folks are trying to cloud the issue," Recology's consultant Adam Alberti, who works for Sam Singer Associates, said. He claims the BLA report concludes that Recology's proposed contract is the lowest cost to rate payers, saving an estimated $130 million over 10 years, that Recology's green rail option is the environmentally superior approach, and that the city's contract procurement process was open, thorough, and fair. "In short, the process works—and it works well," Alberti said. "The rate setting process is an important subject, and one the board should review, but the one before the board now is a fully vetted contract."
Alberti claimed that contrary to the conclusions of the BLA, which found commercial collection rates are significantly higher in San Francisco than Oakland, Recology's rates are cheaper than Oakland—once you factor in Recology's recycling discounts.
Waste Management's David Tucker said the BLA report "raises lots of good questions."
"We have said from day one that transportation was a component of the request for proposals [for the landfill disposal contract] that no other company other than Recology had an option to bid on," Tucker said. "Had we been able to bid on the transportation component, our costs would have been lower."
Tucker believes that no matter who wins the landfill contract, the BLA report points to a lack of transparency and openness under the city's existing refuse ordinance.
"Up until this time, no one has been able to understand the process," Tucker said. "If the Budget and Legislative Analyst has shown that there are some inconsistencies in the statements made by the Department of the Environment, if the process has slight flaws, then the whole process from the request for proposals to the pricing needs to be revised. And time is on the City's side. There is no need to rush into a decision. Yes, our contract with the city is ending, but our capacity at the Altamont clearly goes into 2030 and 2040. So, this is an opportunity to toss out [Recology's] proposal and start again."
Asked if Recology is planning to rail haul waste to Nevada, once its Ostrom Road Yuba County landfill, Alberti said that the city's current procurement process prohibits that.
"Will that be around next time? I don't know," he said. "Recology's first goal is reducing waste, and managing it responsibly. We believe rail haul is an integral part of that."
And he insisted BLA's report should not be connected to Recology's disposal contract.
"Recology believes that the system is working very well, as evidenced by the fact that it's yielded the best diversion rates, lower rates than average, and has an open and thorough rate-setting process set by an independent body," he said. " We feel the recommendations are separate from the matter-at-hand. But if the board so chooses to have this debate, we're anxious and happy to be part of that discussion."
David Gavrich, CEO of Waste Solutions Group, which transports waste by rail and barge from San Francisco, praised the BLA report for "finally peeling back the layers of the onion" on the city's entire waste system. Gavrich notes that in June 2009, he and Port Director Monique Moyer advised DoE of an option on a piece of long-vacant port property that offers direct rail and barge transportation of waste and could result in tremendous long-term savings to ratepayers.
"But we never got a reply to our letter," Gavrich said. "Instead, DoE pushed forward with Recology's trucking of waste to the East Bay, the transloading of waste from truck to railcar in the East Bay, and the railing of waste east to Yuba County."
Sup. Ross Mirkarimi, which sits on the Board's Budget and Finance Committee, is concerned that the city is considering enlarging Recology's monopoly, without calling into question the reform of the 1932 charter.
"I don't think these two questions should be disconnected in the way they are in the proposal to award Recology the landfill disposal contract," Mirkarimi said. "The city and the DOE are very defensive about this and have a well laid-out defense to show that they followed the letter of the law in awarding this contract. But that leads to a secondary set of concerns: namely are we getting the best bang for our bucks, and is there something less than competitive about the current process."
Mirkarimi admits that Recology has been committed to many of the city's environmental policy advances. "But that's aside from the larger question of what this mean in terms of institutionalizing further the expansion of a monopoly," he said. "Our utilities are governed by monopolies like PG&E. So, should we be going in the same direction as 1932, or thinking if we want to diversify our utility portfolio?"