City Tries to Seal Best Deal for Trash and Recycling
When it comes to dealing with its garbage, Austin doesn't have a stellar history. Nine years ago, the city council very nearly agreed to a long-term deal that would have required the city to burn its municipal solid waste in an $80 million incinerator. The scheme, which was to last 30 years, was averted at the last minute, thanks to the election of a trio of new councilmembers and a thorough airing of the problems inherent in the deal.
Today, officials in the Solid Waste Services Department are negotiating 30-year-long contracts for recycling and waste disposal that could eventually cost twice as much as the trash burner. And the talks are occurring at a time when the city's waste disposal needs are rapidly changing. Over the past six years, the amount of waste the city puts in the landfill has declined by 12%, even though the city added nearly 19,000 new residential customers. During the same time period, the amount of material collected for recycling by the city's trash crews has nearly doubled (see graph). In addition, the city now collects more than 14,000 tons of yard trimmings per year from its 132,000 residential customers. Five years ago, the city wasn't collecting trimmings at all.
Despite the length and value of the contracts, there has been little public discussion of the deals. And last month, over the objections of the city's Solid Waste Advisory Commission (SWAC) -- which was formed in the wake of the garbage burner debacle -- the city council voted unanimously to allow city staffers to open negotiations with the world's largest garbage company, Waste Management, Inc. (WMI), on a recycling contract that may be worth $50 million. The council also gave the go-ahead to negotiate with WMI and Texas Disposal Systems (TDS), a locally owned firm, on a 30-year municipal solid waste disposal contract that could be worth $100 million.
City officials insist the contracts -- which could be presented to the council in February -- will be good for the city over the long term, and lock up local landfill space at a good price. Members of the SWAC believe the city is moving too fast and may lock itself into a bad situation.
"We are moving forward without a plan," says Gail Vittori, a member of SWAC since it was formed in 1988. "There are issues that need to be on the table, like a solid waste reduction plan." And last month, the SWAC members, who are all appointed by the city council, went on record opposing the current negotiations on the recycling and disposal contracts because of "a lack of information" about the contracts.
City officials insist that they have to move forward quickly. "It's important for us not to lose this opportunity," says Joe Word, the assistant director for administration at Solid Waste Services. Word says the city needs to have guaranteed landfill space close to the city. He points out that the new municipal airport at Bergstrom Air Force Base will open in mid-1999, which means that within the next 15 months, the city must stop taking municipal solid waste to its landfill near Elroy on FM 812, a few miles southwest of the airport. By negotiating with both WMI and TDS on the landfill contract, "We have the opportunity to enter into a long-term agreement and tie them down," Word says.
But J.D. Porter, the chairman of SWAC, says the city could be the one being tied down, and that SWAC has not been involved enough. "I certainly feel like we've been excluded from the process unnecessarily," he says. For instance, Porter says, the city's request for proposal on the two contracts was sent out November 12, 1996. The members of SWAC didn't get a copy of the document until shortly before their Nov. 17, 1997 meeting. "I understand about staff wanting to keep the numbers in the contract secret, but there's got to be some kind of oversight or this will become a back-room deal," says Porter.
But Word insists that the city has to keep details of the negotiations secret. Otherwise, the bidders will be able to find out what their competitors are doing. "We think we are holding all the cards right now," says Word, a 21-year veteran of the city's solid waste department. Word asserts that the city will be protected in any contract that it agrees to. He also says that SWAC will get to review the contract before it is presented to the city council for approval.
While the landfill contract is fairly straightforward, the city faces a much stickier problem with its recycling contract. For years, neighbors of the BFI recycling facility on Bolm Road in East Austin have complained about the trash, odor, and traffic problems caused by the facility, which sorts, handles, and sells the 2,500 tons of recyclable materials picked up by city crews every month. And last year, the city council passed a resolution pledging to get the facility moved. BFI, seeing a potential advantage in the contract negotiations, began telling neighborhood representatives that it would voluntarily move its recycling facility if it got the 30-year recycling contract.
BFI's tit-for-tat proposal prompted residents in the Gardens neighborhood, who had long been BFI's foes, to advocate that BFI be awarded the contract. On the other hand, city officials were heard saying on several occasions that they felt BFI was trying to "extort" the contract from the city. "We refused to link those two transactions," says Councilmember Gus Garcia, who has been criticized by some Eastside residents for the lack of progress in getting the BFI facility moved. "We wanted to get the best price possible for solid waste services." And BFI's bid on the recycling contract was simply too high, says Garcia. In the end, BFI was excluded from both the recycling and landfill contracts.
But now that the company is out of the recycling sweepstakes, BFI spokesperson Lynda Rife says, "We have no choice but to stay where we are." Rife points out that TDS and WMI both take recyclable materials to BFI's Bolm Road facility for sorting and resale. "If Waste Management builds their own recyclery, we lose the city volume and Waste Management's volume. So we decrease our business significantly." And she adds that the city changed the zoning on the company's property last summer, restricting it to neighborhood office use for any future tenants. "It sounds whiny to say we need help, but the facts are we lost the steady income, we lost customers and the city is taking away the value of our property so we can't sell it," she said.
Johnny Limón, the president of the Gardens Neighborhood Association, is disappointed that BFI won't be moving soon. "That's the bottom line for us, getting them out," says Limon, who says he still hopes the city council will find a way to move BFI out of his area. "I've not lost hope in them. I'm going to hang onto that hope."
Garcia says that area residents are going to have to be patient for a while longer. "I want to find a way to move BFI out," says the councilmember. "I haven't done that because the city manager wanted to finish negotiations with Waste Management first." As soon as a deal is struck, and WMI completes its new recycling facility, the Bolm Road facility will no longer handle the city's recyclables. When that happens, Garcia says, the city council will have fulfilled two of its three promises to the neighborhood. He says it fulfilled its first promise last summer when it rolled back the zoning on the property. And the third objective is to get BFI to move.
"Our message to the Garden Street neighborhood is that we are working as fast as we can to accomplish the three objectives," says Garcia. "We have our shoulder to the wheel and we are moving."
Although BFI's recycling facility is going nowhere fast, the company is in the driver's seat when it comes to negotiating a contract extension with the city. BFI's existing contract with the city expires December 28. Building a material recycling facility takes at least eight months. So even if the city awarded the recycling contract to WMI today, the city would have to find an interim vendor willing to handle its recyclables. And because there are no other vendors capable of handling the contract, the city will be forced to meet BFI's terms. Right now, BFI sells all the recyclables on the open market and pays the city $12.83 per ton of material handled. Under a one-year extension proposed by BFI in September, the city would get $10.33 per ton.
Rife says BFI has to charge the city more because the volume of recyclables being sent to the Bolm Road facility has increased dramatically since the city instituted its "Pay as You Throw" program. And she adds, "The amount of trash in the recyclables has increased. So we have had to hire more people" to remove the trash from the recycled materials.
While BFI is raising its prices and lowering the hopes of its neighbors, Bob Gregory, president and principal owner of Texas Disposal Systems, insists that city staffers didn't give his company adequate consideration on the recycling contract. Gregory said his company gave the city a cost-plus proposal. "Our price was dependent on the cost of processing and the value of the recyclables sold," explains Gregory. "We'd get a percentage of the value of the recyclables. We'd open our books and the city would have complete access to our financials," he explains. But Gregory said city officials were unwilling to consider his proposal, telling him that his prices were too high when compared to what WMI had offered. "They cut me off before they let me explain to them how the deal would have worked," he says.
A Landfill David vs. Goliath
The bad blood between TDS and WMI is thick and deep. And the two competitors could scarcely be more different: WMI had $9 billion in revenues last year. It operates more than 100 landfills, including five in Central Texas, from Waco to San Antonio. TDS has just one landfill, south of Austin near Creedmoor. WMI makes more in one day than TDS makes in a year. In fact, WMI is so big, its opponents even have a webpage (http://www.envirolink.org/envlib/orgs/ebic/pubs/wmx.html) devoted to publicizing its misdeeds.
And though it appears that WMI will get the city's recycling contract all to itself, the company is also bidding against TDS for the city's landfill contract. The city's waste will likely be split between the two companies, but their bids will determine which company gets the lion's share of the city's business. And while the two are trying to outbid each other at the landfill, they are also slugging it out at the courthouse. In September, TDS sued WMI, claiming business disparagement and defamation. The lawsuit, filed Oct. 24, alleges that WMI's local spokesman, Don Martin (who is also a defendant in the case), "routinely and secretly attempted to disparage the reputation of Plaintiff and its waste management capabilities in an effort to eliminate competition and undermine Plaintiff's existing and prospective business relationships."
Much of the suit revolves around a fax message that was created by Martin and later sent out by George Cofer to about five dozen community activists, journalists, and government officials in the Austin area. Martin, who heads Don Martin Public Affairs, is being represented in the lawsuit by Roy Minton. And Martin insists he did nothing wrong. "Every issue that we undertake at our company and for our clients is based on accuracy and the truth, and I stand behind absolutely anything I've put out on behalf of my clients. And I make no apologies at all for being in touch with the environmental community or looking out for environmental protection in Travis County."
Gregory says he did not want to file the lawsuit, but he says he has been dealing with WMI for years and "they choose to do business in such a manner that I felt I needed to send a message to get them to back off." No hearings or depositions have yet been scheduled in the case.
Trash Burner Redux
Whatever happens with the city's current negotiations, Austinites can rejoice over the fact that the trash burner deal was quashed. The city of Tulsa continues to pay heavily for a trash burner project that it built during the 1980s. Next year, it will pay some $18.5 million to keep the plant operating. Thanks to the trash burner, Tulsa residents are paying disposal fees that are more than twice the current landfill disposal rates in the Austin market.
Given that historical backdrop, Porter is urging caution in the current negotiations. "We want to maintain our options," he says, pointing out that the city is in a very strong bargaining position because BFI, WMI, and TDS are all hungry for the business, and all three have landfills in or near the city. The changeable nature of the recyclables market is another reason for caution, says Porter. For that reason, he believes any long-term recycling contract should be tied to the type and quantity of materials collected. "Thirty years ago, we were using steel cans and glass bottles," says Porter. "Thirty years from now we could be using aseptic containers."
Word replies that the city will protect itself in every way possible, but that he believes the city must move forward with the recycling and landfill contracts quickly. "We think we have a very competitive proposal," he says. "And there's no guarantee to the city that it will be available a year from now."
But Porter says that haste could make waste, particularly when there is millions of dollars worth of garbage at stake. "We are talking about a 30-year contract that will impact generations yet unborn," he says. "This may be a good deal for the city, but we don't know that yet."