Fresno City Hall is finally closing the book on a controversial trash-outsourcing deal, but it's costing big bucks.
The City Council on Thursday is expected to give its public seal of approval on a $2.9 million settlement in Sunset Waste Paper's lawsuit over recyclable trash from Fresno businesses.
The vote figures to be a formality since the council authorized city negotiators to offer that amount during a closed session meeting on June 27. However, council members have yet to publicly explain their decision.
Sunset had a contract into early 2015 to receive the city's commercial and residential recyclables. But Mayor Ashley Swearengin in 2011 convinced the council after a long fight to outsource the commercial-trash service to two companies in exchange for budget-fixing franchise fees.
Mid Valley Disposal and Allied Waste each won contracts for half of the city. Recyclables, always a lucrative source of revenue in the trash business, went with the deal.
Sunset sued in May 2012, saying the contract stated in no uncertain terms that the company was to get all commercial recyclables. Sunset wanted $8 million for lost business.
City Hall fought back with a hair-splitting argument: Sunset gets "all" of what city-owned garbage trucks actually deliver to the company's southwest Fresno recycling plant. If the city's trucks don't deliver anything, city officials said, well, that's too bad for Sunset.
That's when the two sides got behind closed doors for frank talks.
Sunset officials didn't return calls seeking comment about the deal. City officials declined to discuss the secret negotiations that concluded after the council's June 27 closed-door decision. A $2.9 million settlement strongly suggests City Hall didn't like its hand if things went to court.
The council on Thursday will vote on sending a check for $2 million. City Manager Bruce Rudd said the final $900,000 is due in the 2014-2015 fiscal year.
The money will come from the city's commercial solid waste reserve.
Council Member Lee Brand said the settlement is a good deal for taxpayers in light of the rich benefits from commercial outsourcing.
"Do the math," he said.
From late 2011, when outsourcing went into effect, through June 2013, Brand said, the city's general fund received about $6.5 million from Mid Valley and Allied. The general fund is discretionary money generally spent on public safety and parks.
Mid Valley and Allied will combine to pay at least $3.5 million annually in franchise fees to the general fund for years to come, Brand said.
If commercial outsourcing had never happened, Brand said, "how many more people would've been laid off? How many more services would have been curtailed?"
Even with a $2.9 million settlement, Brand said, "we come out substantially ahead."
Rudd won't pass judgment on the settlement.
"That was a council decision," he said.
Sunset still handles residential recyclables until early 2015. When that deal ends, Rudd said, "I can assure you the new contract will be very clear as to what we can and can't do."
Three political hot potatoes will serve as backdrop to Thursday's council debate.
Voters in June didn't see eye-to-eye with Brand on outsourcing when they rejected an initiative that would have privatized the residential trash service. Commercial outsourcing in late 2010 and 2011 was nearly as controversial. A $2.9 million payout may again raise questions about the wisdom of the commercial trash deal.
The council in April passed Brand's Litigation Management Act, an effort to reform City Hall's handling of lawsuits. The act was born of council frustration. The city spent $2.2 million on outside counsel in 2006. By 2012, the bill had doubled. Hard feelings also erupted in 2012 after City Hall paid more than $800,000 to a Los Angeles lawyer to get what ended up being a $300,000 settlement in a hostile workplace environment lawsuit in the Fresno Police Department.
Council members passed the act because they felt sure they knew a better way to decide when to fight in court with hired lawyers and when to pony up a settlement on the many lawsuits facing City Hall each year. The council on Thursday will have a golden opportunity to tell the public for the first time since the act became policy why it's wiser to spend $2.9 million to make Sunset go away rather than battle the company over the definition of "all."
Sunset and City Hall have had a brittle partnership for nearly 15 years. The original recycling deal in 2000 was for five years. Sunset officials a year later said they needed an extension to recover the cost of building their southwest Fresno plant.
A divided council in February 2002 gave Sunset a 10-year extension to early 2015 plus two five-year options. But along the way other trash companies said they'd give City Hall a recycling deal that delivered more cash to the general fund than the Sunset contract.
City officials said they can hardly wait to hear what these companies might offer when 2015 approaches.
The reporter can be reached at (559) 441-6272 or email@example.com. Read his City Beat blog at news.fresnobeehive.com/city-beat.