The City of San Angelo negotiated higher prices for trash pickup last year than the winning bidder, Republic Services of Texas, originally proposed. That is what was revealed in a copy of the original Republic bid that was obtained by the losing competitor of the contract, Texas Disposal Systems.
Former City Councilman H.R. “Winkie” Wardlaw III hinted that this might have been the case to San Angelo LIVE! several months ago. He said then that although he was in favor of choosing Republic, he was not pleased that city staff used the trash contract’s behind-closed-doors final negotiations to negotiate what he called a hidden tax increase disguised as a service fee hike.
TDS’ Adam Gregory said that his company made the Freedom of Information Act (FOIA) request for a copy of Republic’s original bid not long after the vote to award Republic a new 10-year trash collection and landfill management contract on July 25. The City Attorney sought the opinion of the Texas Attorney General if she was required to hand over the 500+ page document. The TAG ruled that the city must turn over the document on Sept. 15 last year. Gregory said that after several calls, they finally received their copy Oct. 8.
The document reveals that the city negotiated with Republic to raise the rates that Republic had originally proposed significantly. City staff and Mayor Dwain Morrison have argued that the new contract includes up-front fees paid to the city to make its solid waste fund whole again. According to City Operations Director Shane Kelton, the solid waste fund was running an annual deficit of over $2 million per year. In order to receive those upfront fees and a higher annual lease payment for use of the city landfill, the city allowed Republic to charge more for residential and commercial garbage pickup.
| Item | Proposed Amount | Negotiated Amount |
|---|---|---|
| One-time Payment to the City | $1,000,000 | $3,600,000 |
| Purchase of Cell 11A at the landfill | $1,049,800 | $1,305,000 |
| Funding for landfill closure/post-closure account | $4,735,000 | $4,735,000 |
| Installation of gas detection system (required by TCEQ) | $0 | $670,000 |
| Total Value, Annual Landfill Lease Payments | $1,100,000 | $6,303,000 |
| UPFRONT TOTALS | $7,884,800 | $16,613,000 |
--
Notes: The total for the negotiated annual landfill lease payments of $573,000, negotiated up from $100,000, is for the estimated life of the landfill, 11 years. If the landfill is full before the 11 years are up, then the $573,000 goes away, post-closure.
The original amount proposed for up-front and lease payments offered by Republic was $7,884,800. The city negotiated these payments up to $16,613,000. The net increase in revenue to the city government is $8,728,200.
Residential Trash Pickup Increases
In order to receive the $8.7 million benefit, the city negotiated with Republic to increase residential trash pickup prices up for the approximately 32,200 customers inside the city limits.
| Description | Rate |
|---|---|
| Final Negotiated Rate | $14.47/mo. |
| Republic's RFP Proposed Rate | $11.54/mo. |
| Net Increase | $2.93/mo. |
The original rates, on page 308 of Republic’s RFP response, are for one-time weekly curbside trash pickup and one-time weekly curbside recyclable pickup, and is the same service as negotiated in the final contract. The $14.47 includes a $0.50 monthly penalty to each residential garbage pickup customer for the city as a whole not reaching the contractual-stated goal of 500 tons/month of recyclables. The $0.50 penalty kicks in six months after the start date of the recyclable pickups. In addition, every October, the new contract gives Republic a 2.9-percent increase each of the 10 years. There was no automatic increase in the proposal.
Also negotiated into the final pricing is the allowance for a fuel surcharge that can be added to every customer’s bill when the price of diesel reaches approximately $3.90/gallon.
The numbers above are conservative estimates that do not take into account the 2.9-percent annual automatic price increases, fuel charges, or growth of the number of customers. It conservatively estimates that behind closed doors, the city negotiated to increase Republic’s gross revenue from residential trash collection $11,321,520 over 10 years ($2.93 x 32,200 households x 12 months x 10 years).
Republic states that the $0.50 monthly penalty for not reaching the 500 tons/month of recyclables is a pass-through to Butts Recycling, the local company contracted by Republic to provide single-stream recycling services for the life of the contract. TDS’ Gregory estimates that based on his experience managing recycling operations in other municipalities, reaching the 500 tons/month is improbable because San Angelo’s proposed recycling plan does not include the ability to recycle glass.
Commercial Bonus
Also increased are commercial dumpster rates. The city's Request for Proposal (RFP) document and final contract gives the winner of the trash bid market exclusivity for commercial trash pickup and the rates are controlled by city ordinance.
San Angelo's businesses have complained about the increases on their monthly dumpster bills. When the new contract rates went into effect, Chicken Express franchise owner Travis Montgomery faxed LIVE! a copy of his trash bills, and his dumpster invoice from Republic Services increased 73 percent at the North Bryant store. At the newer Chicken Express location on Southwest Blvd., his Republic invoice increased by 92 percent. The landlord for the Wells Fargo building downtown supplied copies of his invoices reflecting a 73 percent increase, while the Bank of America tower on Sherwood Way saw a 30.9 percent increase.
Determining Republic’s increase in gross revenue the final negotiated commercial rates to the original bid is more difficult because more options for businesses were added in the new contract. It’s not a direct apples-to-apples comparison. In all, there are 2,497 commercial customers as indicated in the city’s original RFP document. TDS studied the rates and released to us a conservative estimate of the overall gross revenue benefit to Republic that the city gave them in final negotiations.
| Customers | 2013 Pre-Contract | Proposed | Negotiated |
|---|---|---|---|
| 2,497 | $284,000 | $415,525 | $489,045 |
The negotiated price increase over the Republic’s original proposal gives Republic an estimated $73,519 per month increase in gross revenue. Thus, over the life of the contract, Republic was given increased revenue of appoximately $8,822,280 ($73,519 x 12 months x 10 years).
The commercial price increase estimates above do not take into account the annual 2.9-percent automatic price increases, fuel surcharges, or the growth of the number of new businesses. Neither does the final number calculated above include revenue from temporary trash pickup (in “roll-off” containers) that is generally used at construction sites.
Conclusion
Conservative estimates are that the city allowed Republic to charge San Angelo citizens and businesses $20,143,800 more in fees for a total cost to Republic of $8,728,200 in upfront cash and increased landfill annual lease payments to the city government. Here’s the math:
| Item | Amount |
|---|---|
| Residential Revenue Boost | $11,321,520 |
| Commercial Revenue Boost | $8,822,280 |
| Total Revenue Boost | $20,143,800 |
| Less difference in upfront fees to city and lease payments | ($8,728,200) |
| Republic’s Net Benefit | $11,415,600 |
Put another way, during the negotiations, the city asked from Republic an upfront investment of $8,728,200 more than its original RFP proposal, and offered an annuity with a total value of $20,143,800, or $2,014,380 per year over 10 years, in return. That's a 23-percent annual interest rate on that initial investment. And this figure does not include the annual 2.9-percent fee rate increases built-in to the contract, fuel surcharges, or anticipated population (and customer) growth.
---
An MBA emailed and noted that another way of looking at the $8.728,200 investment would be to look at the Internal Rate of Return. IRR is used by companies to compare different investment opportunities to aid in selecting which one to pursue. In this case, an investment of $8,728,200 yields an annual cash flow of $2,014,380 each year for 10 years. The IRR for that $8.7 million investment is 19.04 percent (calculator).
Subscribe to the LIVE! Daily
Required
Comments
I'm wondering if any kind of class action law suit can be filed by the citizens of San Angelo against the mayor and council members charging them with mismanagement of our tax dollars and these under the table dealings they make with our dollars ?
- Log in or register to post comments
PermalinkOk folks time to speak. We as citizens and property owners of San Angelo have the right to answers. For all too long we have been told what our city and Republic wants us to know, not what we deserve to know. Strange how Republic has changed its management since being awarded the new contract, all the good people who worked for Republic to secure this have been chased out except for 2-3 people. Since last July Republic San Angelo has managed to loose the Area VP, GM, Ops Manager, Residential Manager, Maintenance Manager. I believe these good folks were entertained for the purpose of securing the contract to show stability, after which a new set of outside puppets were brought in to keep the dirty dealings under wraps. We have seen our rates go up but the change in service has not been started as of yet, so why do we have to pay for their inability to provide the services that the contract had promised us. Figure the increase for all of the residence new rate plus trash tax would exceed 1.4 million for all of us, but yet we have not gotten what we are paying for. Would we allow this from other area business? Help us understand.
- Log in or register to post comments
Permalinkis for someone to speak to a lawyer on behalf of the citizens and see if we can't sue both republic and the city for pushing through increases like this without our consent. Also it would be nice to see if we could sue republic since they are charging us for things they aren't providing.
- Log in or register to post comments
PermalinkSo now we know why the head shyster aka mayor was trying to keep it all quite and pushed it hard and fast like the Dems did Obama care. It will be interesting to see what kind of civil and or criminal legal actions will be comming down the road costing this city even more money. And to think he belives he has a chance for reelection.
- Log in or register to post comments
PermalinkYes, I like many other San Angelo, Texas taxpayers would like to know what leagal action if any has been moved forward against Brannon Paving Company for the shoddy job we received on many of our streets last year!
- Log in or register to post comments
PermalinkEveryone rally together and as a united force we should arrest these lowlife/highlife scum. Or are you entirely without a doubt the most ignorant bunch of fools they make you out to be.
What we have here is clean cut, and I love to say I told you so, your city "leaders" are giving you the long end of a crooked shaft. I call for a full and complete investigation and a full and complete audit of said organization and all funds in question be siezed from all parties in question
... because what seems to be the case is a conspiracy to rob the community @ large. Are you going to let them get away with this?... I wouldn't doubt san angelo standard times prints front page bold. Oh nevermind if it has the name San Angelo in it it's probably running criminal schemes to screw you out of your hard earned money. And how long have these people been running illegal bond negotiations and cash exchanges on the citizens dime. : TOM GREEN COUNTY/SAN ANGELO ARE STEALING AND HAVE BEEN STEALING MILLIONS OF DOLLARS FROM YOU ALL AND ALL YOU DO IS SIT THERE AND ACCEPT THAT? let's start holding these appointed leaders responsible for their illegal acts.
- Log in or register to post comments
Permalinkis one person to get it started. I live in the county and went with Texas Disposal so I can't do it. So 'YouAreTheReason ForTheTreason' go for it. Then maybe the others will join in.
- Log in or register to post comments
PermalinkIs there malfeasance on the part of the mayor and city council? It sure may be a case for it.
- Log in or register to post comments
PermalinkThe city counsel and their crooked agendas never go questioned or contested the community as a whole should object to all of these plans set force and passed so quickly with no forethought...million dollar deals...
There should be a cap on what funds go where and full disclosure of what funds have gone to what organizations and complete transparency as to what these deals are and the differences between the plans set out in all aspects...that benefit us as a whole not just one fat cat...and accountability...next time an agenda is pushed/rushed through...
ORGINIZED CRIME PLAIN AND SIMPLE.
- Log in or register to post comments
Permalink31 pounds of recyclables per customer per month? Wow, I'm not sure my house generates 31 pounds of trash per month...
- Log in or register to post comments
PermalinkOnce again the city council and the Mayor must have used the accounting firm of Dewey, Cheatem & Howe to come up with this new contract. Everything about the new contract smells very bad and I'm not talking about the landfill. I think one of the first signs of deceit with this contract, was the increased cost to the customers but then to decrease the amount of service (i.e. once weekly pick-up vs. twice weekly), that alone must be a fuel, labor and equipment savings of a significant amount for Republic. I guess we should be used to this type of city gov't with the current bunch of misfits, but there is an upcoming election!!!
- Log in or register to post comments
PermalinkLet's remember who got us into this and who tried to stop it.
The following "representatives" voted FOR this contract with Republic back in July:
Morrison
Farmer
Silvas
Self
The following representatives voted AGAINST the measure because they could see what was coming and/or at least wanted more time to explore other options:
Grindstaff
Vardeman
Fleming
Just Sayin ...
- Log in or register to post comments
PermalinkCity council frequently likes to make noise about cutting the property tax by about $.10 over the last 10 or 11 years. Maneuvers like this and the storm water fees show they haven't really cut taxes at all. They've just moved it to the utility bill. Add in reappraisals and fee increases and the tax load is higher than ever. Second highest taxes in Texas sneaking up on first.
- Log in or register to post comments
PermalinkWhat part of this deal is not fraudulent? Why didn't the representatives that voted against this bring the issue up to the citizens prior to a vote. This is the same type of transparency we are seeing with the Federal government. Go behind closed doors and do what you can get away with. We were wondering why Republic was getting so much more money for less service. It was the payoff for complicity.
- Log in or register to post comments
PermalinkThe Mayor sold this deal as being beneficial to city when it comes to the landfill. Is that not the case?
http://sanangelolive.com/news/business/2014-08-08/san-angelos-mayor-offers-hearty-defense-new-trash-contract
- Log in or register to post comments
PermalinkThis is now a revenue stream for City Hall. Similar to what they did with PILOT on the water bill before we got it eliminated. Instead of just paying for the trash service, we now pay an extra $2 million per year on the utility bill. That's about the same as 6 cents extra in property tax.
Good for city hall in that they can increase the amount of money the citizens/customers/tax payers pay without actually "raising taxes." Not so good for the citizens and businesses that pay this hidden tax that ends up on the utility bill. San Angelo has about the lowest pay scale in Texas and one of the highest effective tax loads. How is this good for the City as a whole. City hall is not the City.
- Log in or register to post comments
PermalinkIf am wrong about this please correct me but it seems to me when you look at what the city is paying for the extra upfront money we have rated our city less favorable than junk bonds. According to a USA Today article dated Dec 18 2014 the average Junk bond yield rate in mid June of 2014 was at 4.93% (7.24% mid Dec 2014). In 2008 during the Great Recession the rate was 22.14%. I would post the article URL but I am not sure if I am allowed to do that. Keep up the good work Joe. Please don't let story be forgotten anytime soon.
- Log in or register to post comments
PermalinkEach of the four named in my Subject Line above should seriously consider resigning ASAP; but if they choose to not resign, they should then prepare for a serious lack of support on Election Day.
<Sarcasm On> Great job, Dear Leaders! <Sarcasm Off>
- Log in or register to post comments
PermalinkThe move to once a week collection of trash is quite an increase of revenue for Republic Services Of Texas. Imagine the layoffs! Cut the work force by half! No wages for those employees deemed excess; no health benefits for them (if any were provided anyway). Great job, Dear Leaders! Oh, I forgot the sarcasm on/sarcasm off labels! Well, the readers are able to discern the on and off points................
- Log in or register to post comments
PermalinkWhat benefit would be realized by the citizens of San Angelo by paying higher rates, experiencing fewer collections, and incurring penalties for not having sufficient recyclables at the curb? Anyone? Gus Clemens, any comments about about my alleged attempts to interfere with someone's right to carry concealed? Ah, I'll leave it like this for the evening; however, Gus Clemens can contact me at anytime. Good Night All!
- Log in or register to post comments
Permalinkmaybe we should fine republic .50 cents a month for every person in the city who can't recycle because we don't have our bins to do so. After all we are being charged for a service we can't receive. seriously considering calling a lawyer in DFW area to see if a class action suit could be done against them
- Log in or register to post comments
PermalinkI propose that in light of the trash debacle we provide our fearless civic leaders some new accommodations for the Council Chamber. We will just remove the plush leather high back chairs and replace them with the 96 gallon plastic dumpsters that will soon grace the front of every residence in town.
No need to waste the new ones that are being stockpiled for distribution I'm sure we can get some nice smelly used ones from some of the residents that have been so "fortunate" as to be part of the pilot for this mess. That way when they are sitting up there on the half-circle high horse, the City Council and City Manager will always have a reminder of what the citizens of San Angelo really think of them. I guess if the pressures get to great they can always just close their lid.
Oscar the Grouch for City Council!
- Log in or register to post comments
PermalinkShe is right, we are already paying for a service we are NOT receiving. Why did the city start collecting fees from us before Republic provides the service we were promised? Farmer is a joke and she is unopposed, why?
Why are the county commissioners paid so well and we have volunteers running the city, doesn't make sense.
- Log in or register to post comments
PermalinkOn the main lawn of the TGC district court... Cause a real stink...you people are nothing short of pushovers.
- Log in or register to post comments
PermalinkPost a comment to this article here: