Fresno council, administration divided over recycling and green waste contracts

Samuel Juarez works on a bale of cardboard at Sunset Waste Systems in Fresno in 2013. What company should have the next recycling contract has become a political controversy at City Hall.
Samuel Juarez works on a bale of cardboard at Sunset Waste Systems in Fresno in 2013. What company should have the next recycling contract has become a political controversy at City Hall. Fresno Bee Staff Photo

Fresno’s trash, it seems, will forever be a politically messy business.

A few recent examples: The City Council and Mayor Ashley Swearengin in 2011 clashed over her plan to outsource the commercial-trash service to two companies in exchange for franchise fees. In 2013, the entire city was polarized over Swearengin’s plan to privatize residential trash pickup, a showdown that the mayor eventually lost when voters narrowly rejected the Measure G ballot initiative.

Now, council members and the Swearengin administration are clashing over recycling and green waste. While largely waged behind the scenes, the battle has in many ways been no less contentious than those over commercial and residential trash pickup.

At stake are taxpayer dollars and, of course, profits for the private companies competing for the city’s business.

Looming possibly larger is the fallout from the clash, in which the end result is the council essentially taking over the process of awarding recycling and green waste contracts.

Last month, the council rebuffed a plan by City Manager Bruce Rudd and instead directed City Attorney Doug Sloan to negotiate deals with the top two finishers in what was an administration-run bidding process for picking up the city’s recycling and green waste. Rudd had wanted to reboot the process and hire an outside consultant to oversee it and interview all the bidders.

Now, Rudd worries about precedent, wondering if it is acceptable for the council to forgo the competitive bidding process on any city service and simply award a contract to anyone it chooses based on a majority vote.

“It’s just fraught with trouble,” Rudd said.

It was not handled well. It was a poorly done process. I was very disappointed.

Fresno City Council Member Olivier Baines

A majority of the council, however, was unhappy with how the process unfolded over the past year.

“It was not handled well,” Council Member Olivier Baines said. “It was a poorly done process. I was very disappointed.”

This latest saga goes back almost a year, when Rudd and Mid Valley Disposal began talking about renewing an existing recycling contract.

In 2014, Mid Valley bought Sunset Waste Paper, the company that had the city’s recycling contract. It was due to expire a year ago, but had a five-year extension option. That is what prompted the negotiations between the city and Mid Valley.

Also coming up last year was a $900,000 payment from the city to Sunset, the final chunk in a lawsuit settlement.

Sunset said it suffered $8 million in lost recycling business when the city privatized commercial trash service. Mid Valley and Allied Waste each won contracts for half of the city. Recyclables, a lucrative source of revenue in the trash business, went with the deal.

Sunset, fearing lost business with Mid Valley and Allied taking over recycling pickup, sued. In June 2013, the city agreed to pay $2.9 million to settle the suit. The city paid Sunset $2 million, with the remaining $900,000 due last year.

As for the recycling contract itself with Sunset, Fresno officials said it wasn’t favorable to the city. Fresno was paying Sunset/Mid Valley $18.50 a ton, and Rudd said the market was so healthy that the city should be getting paid to have its recyclables picked up, not the other way around. The contract was, Council Member Lee Brand said, terrible for Fresno.

Seeking a better deal

So Rudd and city staffers went to work. Only they didn’t inform the City Council.

Still, Rudd liked the end result.

“We had negotiated what I thought was a pretty lucrative deal for us,” he said.

Under the proposed 10-year agreement, Mid Valley would pay the city to pick up the recyclables – a minimum of $10 per ton. The company also agreed to let Fresno off the hook on the final $900,000 lawsuit settlement payment. The city and Mid Valley also reached agreement on green waste pickup. The city is now paying around $24 a ton to two different companies on green waste pickup, and while Rudd wouldn’t reveal the agreed-on green waste amount with Mid Valley, he said it was significantly better than what the city does now.

The plan, Rudd said, was to recommend Mid Valley for both recyclables and green waste, but give the council the option to award just recycling pickup to the company.

Council members were stunned. They only learned of the deal when Mid Valley approached them to make sure they were on board. Instead, they hated the whole deal.

“That was about to be a catastrophe,” Baines said.

A majority of council members were concerned about several parts of the proposed contract – that it was 10 years, that it included not just recyclables, but also green waste, and most importantly, that it was negotiated in private with no competitive bidding process.

“The smell test is that is bad public policy,” Baines said. “Awful public policy. We can’t just give them a contract with no competitive bidding process. It is not our job to give monopolies.”

Even worse, the contract was with Mid Valley. The company was a key player in Measure G. Under Swearengin’s residential trash pickup plan, Mid Valley would have gotten the contract. The company and its owners contributed close to $380,000 – more than half the Yes on G campaign funds. They also contributed to Swearengin’s unsuccessful 2014 campaign for state controller.

Nobody says the Swearengin administration was rewarding Mid Valley for its political support, but they did say the appearance was troubling.

“It doesn’t look good,” Baines said. “In a situation like this we have to be above reproach.”

Added Council Member Esmeralda Soria, who was newly seated on the council when news of the Mid Valley contract broke: “Given the long-term length of the contracts and the Measure G debacle, it was important that our council ensure there was a fair and transparent public process in awarding the contracts, rather than award the recycling and green waste contracts to one vendor without a public process.”

The whole impetus ... was this goal to mitigate future rate increases as much as we can. It had nothing to do with anything else other than that. We were just chasing the dogs. Negotiating hard and heavy.

Fresno City Manager Bruce Rudd

Rudd said he was of one mind in pursuing the Mid Valley deal – reaching the best possible outcome for the city. The city’s Solid Waste Unit was losing $3 million per year, he said, and the numbers said the city would need at least a 15 percent rate increase “in order to cover the hemorrhaging.” Something – several things, in fact – had to be done.

The first piece of the puzzle was shaving $5 off the per-ton tipping fee for dumping trash at Fresno County’s American Avenue Landfill. That cut the Solid Waste Unit deficit up to $1 million annually, Rudd said. Not paying Mid Valley to pick up recyclables saved another $800,000, and having Mid Valley pay the city instead cut the deficit another $600,000. With the reduced cost of green waste disposal, Rudd said the city would no longer need a rate increase.

On top of that, the city would save the $900,000 lawsuit-settlement payment.

“The whole impetus to do what we were doing with Mid Valley was this goal to mitigate future rate increases as much as we can,” Rudd said. “It had nothing to do with anything else other than that. We were just chasing the dogs. Negotiating hard and heavy.”

It wasn’t to be.

Back to square one

So Rudd, Public Utilities Director Thomas Esqueda and the city started over, this time putting out a request for bids.

Rudd also went ahead and paid the $900,000 to Sunset.

When the bids came back, three companies were seeking the recycling contract, and five wanted green waste. Mid Valley was the only company to bid for both.

Mid Valley was the low bidder for recycling, offering to pay the city $10 per ton. The bid went to $13 per ton if the city gave the company at least half of the green waste. The bid for green waste was the city paying $19.50 per ton.

Cedar Avenue Recycling & Transfer Station, owned by Fresno’s Caglia family, came in second on recycling, offering to pay $7.50 per ton.

On green waste, Kochergen Farms Composting was the low bidder at $16.75 per ton, with West Coast Waste second at $18 per ton. Mid Valley was third.

But again, there was trouble. The bidding process was flawed because the city didn’t interview the respective bidders. The proposals had quirks that only interviews could determine. For instance, a bid might have a per-ton amount but also include a signing bonus that meant a bid amount might not actually reflect the bid’s true value.

Rudd recommended the city start over with a new request for proposals, and hire a consultant to manage the bidding process.

Instead, the council pushed back.

Several members felt the bids were solid, and there was no need to restart the process. On top of that, a majority felt it would be better to divide the work instead of giving the recycling contract to one company and green waste contract to another.

Council Member Steve Brandau proposed that Sloan, the city attorney, negotiate with the top two bidders for recycling and green waste and see if they would be willing to share the contracts – and if the second-place bidder would be willing to meet the price of the top bidder.

“As a small business owner where you can only get your product from one person, you want multiple sources of getting your needs met,” Brandau said. “We need multiple providers for the city of Fresno so we don’t get stuck.”

Brandau pointed out that he supported Measure G.

“I love Mid Valley,” he said.

But he was not interested in handing a 10-year monopoly to anybody.

Rudd is normally even-keeled on the dais, but as it became clear the council was prepared to push him and the Swearengin administration to the side and go it alone, he looked as though he was ready to blow a gasket.

“Now it is acceptable for the council, on any given Thursday, to say, ‘I want to award this contract to X, all in favor?’ ” Rudd asked rhetorically in a subsequent interview.

It appeared that was the case. Brandau’s proposal passed 5-2, with Brand and fellow Council Member Clint Olivier in opposition.

“I had never heard of the City Council deputizing a city attorney to work on such a huge issue related to such a specialized business,” Olivier said. “I understand the concerns of my colleagues. They want to do it right, but I’m afraid an attorney with zero experience in waste contracts won’t be able to take on such a huge and specialized project all by himself. Instead of being worked out by industry professionals, it’s now being worked out by politicians – and that concerns me.”

Rudd added that splitting the contracts may stop a monopoly, but if getting the best financial deal for the city is the ultimate goal, it might not turn out as well. Splitting a contract, he said, is counterintuitive because trash is a volume-based business. If you cut the volume, the price might not be as strong, he said.

Sloan’s charge is to negotiate with the two best bidders for each of the contracts – one for green waste, one for recyclables. Sloan and his team have been negotiating since around Christmas and are almost finished. He said he expects to bring the results to the council at one of its two February meetings, either on the 4th or 25th.

“We’re doing our best to come up with something the council will accept, but we’ll see,” Sloan said.

Rudd, in the meantime, is out of the loop.

“It is up to (the council) and the city attorney now to figure out whatever it is they can negotiate,” he said. “It is out of my hands.”