San Angelo's Mayor Offers Hearty Defense of New Trash Contract

Mayor Dwain Morrison defended the City of San Angelo’s decision to award a 10-year contract to Republic Services. The decision to go with Republic over competitor Texas Disposal Systems is a significant milestone in the San Angelo trash controversy. Losing bidder Texas Disposal Systems CEO Bob Gregory said that the contract’s value was approximately $466 million.

Critics have said that the city’s staff and council acted too quickly and ignored the desires of commercial trash customers who wanted to resolve the alleged overcharging of commercial dumpster customers before the contract was signed.

Morrison spoke to the San Angelo Rotary Club last week in defense of the new trash contract.

“There’s been a lot of misinformation that’s been spread about this trash contract for a couple three months since we’ve been negotiating it,” he said, starting his defense of the city’s actions. “Misinformation has the ability to change things to when they’re not even recognizable to what they are really. And that is the problem that we’ve had with this trash contract.”

Referring to an earlier trash controversy in 2003, Morrison said it was a war then. “But this one in 2014 was even worse,” he said. “And there’s been a lot of harmful and hateful things said over the Internet primarily by these people that do not put their names on the things that they say. There’s been some injurious things said about council, about our city staff…but we were gagged. We could not speak back in our own defense. We could not say anything. But now the contract has been signed, the gags are off, and we’re now able to play offense.” He compared his type of offense to the 1980s Chicago Bears.

He then gave his side of the why the Republic contract was the best decision for the city.

“We had the best trash pickup and service, with the cheapest price, anywhere in the world, with two men on the back of a truck. That contract ended yesterday (referring to July 31, 2014),” he said. Morrison said that the city had no choice but to speed things along because of the old contract’s expiration date.

Morrison discussed how complex the trash business has become since the Environmental Protection Agency (EPA) and Texas Commission on Environmental Quality (TCEQ) placed stringent rules and regulations on landfill operations. Recalling growing up near the old dump, Morrison said that the dump was still called a “dump” and it always had a smoldering fire. When the dump was moved to its current location on 50th Street, he recalls that it was still burning there. Today, he said, environmental rules do not allow that. “About 10 or 15 years ago, ‘dumps’ ceased to exist and they became ‘landfills’ and they are entirely different animals,” he said. “Now they cost millions to open, they cost millions to maintain, they cost millions to operate, and they cost millions to close. And there’s a lot of companies in the country that have their fingers in that pie to get their piece of this landfill business,” he said.

Morrison said that the city had learned over the years that the old contract with Republic did not maximize the city’s opportunity for revenue. That is the reason, he said, that the council held a bidding competition, or Request for Proposals process to try to get the best deal. Seven companies were invited to the RFP; two submitted bids: the incumbent, Republic Services, and Texas Disposal Systems headquartered near Austin. He stated that the council didn’t have to conduct an RFP process. It could have chosen Republic and negotiated a new, no-bid contract with them.

“But because we wanted to get the best service for our citizens, we went out for proposals,” he said.

He said that the city’s bid request asked for three things: it asked for a bid for the management of the city’s landfill, in addition to residential and commercial trash pickup. The city offered an exclusivity contract for those services inside the city limits to the winning bidder.

After the bids were submitted, a committee of two council members and city staff decided which company’s bid was the winner. After choosing the winner, city staff was instructed to negotiate the best deal for San Angelo, he said. At the end of the bid process, Morrison stressed that the city council voted 7-0 to initiate final negotiations for a new contract with Republic on April 1.

“This was not a sealed bid,” Morrison said. Explaining that a more traditional bid process for a simple, tangible product, like a fleet of pickups, is different from the trash RFP process, Morrison said, “This was a bid [process] where we went out for options. We said we want this, and this and this. And we gave them a checklist of the things that we wanted. And then we asked them [to suggest] other options, for options that we possibly could use, because they [the bidders] are the experts.”

“And we could not let these options out before we negotiated a contract.  You always bet your hand before you show your cards,” he said.

Morrison then described the services that are incorporated into the new trash contract with Republic, including:

1. A one-time $3.6 million royalty fee for the use of the San Angelo landfill.
2. Republic will set aside $4.735 million into a trust fund that is designated to pay for closure and post-closure costs. In addition, Republic will pay into the fund $184,000 per year. State law requires that the fund for San Angelo’s landfill be approximately $8.4 million. Morrison said that Republic’s trust fund freed up $3.23 million for the city to spend on other priorities.
3. Republic will pay the City of San Angelo $573,000 per year for the right to use the landfill.
4. Republic will pay $327,000 per year as a host fee.
5. Republic will pay the two remaining $335,000 payments owed to the State of Texas for the methane gas containment and flare system that was installed six years ago.
6. Republic will pay $1.305 million to the city for the construction of another cell at the landfill, increasing the landfill’s capacity.
7. Republic will no longer charge the city approximately $170,000 per year for allowing citizens once per month dumping privileges.
8. Republic will offer to fund ten $1,000 annual scholarships to local high school graduates from Lake View, Central and Wall High Schools, total contribution $10,000 per year.
9. Republic will construct a convenience center to drop off trash at the landfill entrance.

10. Republic will accept full responsibility for the past, present and future environmental liabilities for which Morrison said the city is currently responsible.

Morrison outlined the new residential trash pickup service:

1. Republic will provide once per week trash pickup and once per week recyclables pickup.
2. Republic will provide every residential trash customer with a blue and green trashcan “cart” free of charge.
3. For the recycling, Morrison said that Republic is contracting with local company Butts Recycling. The recycling service initially will include everything but glass.
4. Once per quarter, Republic will pick up bulk items, like old furniture, at the resident’s curbside, up to five cubic yards.

For the negotiated residential service, Morrison said that the city increased fees to $13.97 per month per residence for trash pickup. And, he added, if the cumulative monthly recyclable weight does not meet or exceed 500 tons, an additional $0.50 would be added to every residential bill. “You’ll be paying about $4 more than you’re paying now and the price hasn’t been raised in seven years,” Morrison said.

“This is a great contract and is worth millions of dollars to the city and to our citizens over the term of the contract,” Morrison wrote in a handout given to the audience.

Morrison said that TDS offered less. According to Morrison, they proposed:

1. $0 royalty fees
2. $0 closure and post-closure fees
3. Morrison quoted the TDS proposal for emphasis, “TDS is willing to quickly negotiate an agreement whereby it will operate the new landfill on a City-approved cost plus 20-percent. Under such an agreement, the City will bear the cost of design, the cost of permitting, the cost of…gas containment, closure and post-closure care related to the landfill. And TDS will simply be a contract operator, indemnified from liability.” Morrison offered his interpretation, “In other words, the landfill belongs to you, City of San Angelo, and it will still belong to you, you’re still responsible for it, you’re still going to have to permit it, you’re still going to have to pay for everything, you’re still responsible for your methane, you’re still responsible for everything you’re responsible for now, and we will operate it for cost, which is not defined, plus 20-percent.” (Morrison’s emphasis)

Morrison said more of the TDS proposal, “TDS cannot accept liability for the site, landfill, and requires the protection of an indemnified cost plus arrangement. Republic says ‘we take responsibility for this landfill, past, present and future. TDS says we will have no responsibility for this landfill, and we want you to indemnify us against any problems, past, present or future.”

“These are the things that we looked at in the two proposals that we got, “ Morrison said. “And these are the reasons that we said, ‘Republic has the best deal.’ I believe Republic is trying to work with us, and TDS is not. And this is the reason we couldn’t show you these things. We were negotiating with Republic that is paying us tens of millions of dollars and TDS is offering us nothing. We didn’t want Republic to know that, because their options would change. We could not let this information out until the contract had been negotiated and finalized, and signed.”

On the cost of trash pickup for residential residents, Morrison explained that TDS was more expensive.

“For one pickup per week, recycling one time per week, same exact thing, from TDS for $17.75 per month,” Morrison said. “Then, you have a 5% billing fee that Republic is already paying. Five percent of $17.75 is $0.87.”

“And remember this landfill closure fee, the $8.4 million that Republic is going to take over and pay for? TDS is not paying for that. So who does? Our citizens will still be paying and building up a fund of $8.4 million to close it. I’m just guesstimating that this is worth another $3 per month [per residential customer]. I come up with $21.22 as the average monthly pickup that TDS would be charging us for the exact same thing that Republic is doing for $13.97.”

Morrison admitted that the fuel and environmental recovery fees were not authorized by ordinance. There was an online petition signed by over 700 citizens asking the City Council to delay awarding the contract to Republic until the alleged overcharges of environmental recovery fees and fuel charges were resolved. Morrison disagrees that waiting up to six months to resolve the issue was advantageous to the city.

“Had we waited the six months, as [some on the] council wanted to do, to sign this contract, we would not have a contract today. We could have negotiated with Republic to continue our trash service, but when you don’t have a contract, and you don’t have a bargaining position, guess who dictates the fees?” Morrison asked.

By accepting Republic’s promise to resolve the overcharging issue separately from the new contract, Morrison said the City was able to negotiate a tremendous deal for the citizens of San Angelo. Citing Midland, Abilene, Big Spring, Odessa, and Lubbock residential trash pickup rates, Morrison said that San Angelo’s is the least expensive. And the pickup, he said, includes the weekly curbside recycling and once per quarter bulk pickup.

“I’m just glad I’ve had a chance to tell you about it, because this is what we’ve seen from the beginning,” Morrison said.