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Executives wage intense PR effort over city’s recycling contract

Thursday, December 10, 2009 by Charles Boisseau

Recycling and waste-hauling company executives have engaged in intense public relations efforts – including exchanging charges of violations of a city contract and the city’s anti-lobbying laws – in advance of next week’s City Council vote on renegotiating the city’s contract with its recycling company.

 

In what might have been a preview of the Council debate, a divided Solid Waste Advisory Commission voted Wednesday night to recommend that the Council make major changes in its contract with the recycling company Greenstar, after rejecting a proposal to cancel the contract altogether.

 

On Tuesday and Wednesday, Greenstar North America Chief Operating Officer Dennis Soriano conducted interviews with reporters from a half dozen local TV and radio stations and newspapers, as well as In Fact Daily, as he advocated for the company’s proposal to extend its recycling contract with the city. This follows on the heels of efforts by Greenstar lobbyist and ex-Austin Mayor Carole Keeton Strayhorn to push the company’s case with city staff and elected officials.

 

Meanwhile, Bob Gregory, president of Texas Disposal Systems, on Tuesday sent an e-mail to members of the advisory commission and the staff of the Solid Waste Services Department that advocated the city hold off on extending the recycling contract to allow the city time to complete a separate, ongoing process to build a new material recovery facility (MRF — or better known within the recycling industry as a “murph”).

 

Gregory also provided a detailed analysis that he said indicated that Greenstar has reimbursed the city about $150,000 less than the “market rate” that it is required to pay for processing recyclable materials under the current two-year contract, which began in October 2008.

 

“I’m concerned that they are violating the contract. Really, it’s up to the city to determine that,” Gregory said in a telephone interview. He advised that the city should include in its amended contract the ability to periodically audit Greenstar to ensure it is being properly reimbursed for the resale of recycled materials.

 

Soriano, reached on his cell phone as he was sitting on an airplane to return to Houston on Wednesday afternoon, declined to immediately comment on Gregory’s charges but, after landing, he followed up with an e-mail response, relayed by his PR firm. “Under initial review, Mr. Gregory’s numbers are inaccurate,” Soriano wrote. “All of our prices are a function of pre-determined formula pricing that is set by the initial contract. I have asked our staff to review the assertions and we will respond appropriately.”

 

Soriano also countered that Gregory may have violated the “anti-lobbying” terms of the RFP process for the MRF, which sets limits on direct communications with city employees and board members during the RFP process.

 

Based on our understanding, direct communication with the Solid Waste Advisory Committee during the RFP process by potential bidders is prohibited under City of Austin laws. We are surprised that Mr. Gregory, who we thought would have been a potential bidder, has made this direct contact,” Soriano wrote.

 

SWAC votes to change the terms

City staff presented a set of terms to SWAC members that Greenstar had offered as possible ways to modify the current contract, which with extensions is set to end in Sept. 2011. Assistant City Manager Robert Goode said the city’s goal is to cut its costs, but maintain hauling services until the city can get its own MRF completed, estimated to be around Sept. 2011.

 

The three options on the table included:

  • Option 1, a plan that would reduce the cost of hauling the city’s recycling from $90 a ton to $70 a ton, saving the city $4.5 million but would extend out to Sept. 2013, two years past when the MRF would presumably be online.
  • Option 2 would reduce the hauling cost to $85 a ton, and would end in Sept. 2011, saving the city some $579,000.
  • Option 3 would lower the cost to $86.50 a ton, with Greenstar hauling 100 percent of the city’s recycling until March 2011, and 50 percent until Sept. 2011 to allow the Austin MRF an opportunity to get up and running. It would save the city $405,000.

 

Commission Member J.D. Porter offered what he called “Option 4,” a resolution essentially calling on the City Council to cancel the Greenstar contract as soon as possible and start a new round of bidding to find a better deal for the city.

 

Goode responded to the resolution by saying that such a measure would cause numerous problems. “We have to take those materials somewhere,” he said. “We don’t have the manpower to interrupt the flow of recycling. It would bring the entire Single Stream process to a halt. We have to have something in place.”

 

Several members of the commission agreed, saying Porter’s idea was unworkable. Sensing a lack of support, Porter withdrew his motion.

 

Co-chair Rick Cofer then made a substitute motion that would recommend that the Council accept Option 3, with several conditions, including:

 

  • The city re-negotiate the contract with Greenstar, but wait to execute it until SWAC and the Environmental Board have an opportunity to review it;
  • The city should audit Greenstar’s operation to ensure that the city is being paid a fair price for the sale of its recycling materials;
  • The city and Greenstar should negotiate a definition of “fair market price” for the recycled materials; and
  • The contract should obligate Greenstar to actually recycle the materials it hauls from the city (something that is apparently not in the current contract).

“We all know the current contract (with Greenstar) is a dog,” Cofer said. “At least this gives the city a chance to pick off some of the fleas.”

 

The commission voted 5-1 to approve Cofer’s resolution, with Porter voting against it. Chair Gerry Acuña recused himself from the debate.

 

Anti-lobbying ordinance

The city’s “anti-lobbying and procurement” ordinance, passed in December 2007, prohibits bidders from contacting most city employees – such as City Council members and members of boards and commissions, anyone but a single authorized contact person – during a “no contact period” — from the time a solicitation is issued until a contract is executed. If an unauthorized contact is made a company’s bid could be disqualified.

 

Gregory said his remarks didn’t violate the anti-lobbying provisions. He prefaced his e-mails by writing it was “intended only to convey my thoughts related to the extension of the Greenstar contract now pending before Austin’s Solid Waste Advisory Commission … and not intended to relate to the pending Recycling Services RFP. That RFP process has an Anti-Lobby provision and represents a different issue, which is not the subject of this discussion.”

 

Jennifer Herber, public information officer with the city, said she couldn’t immediately say whether the e-mails violated the anti-lobbying provisions. “Solid Waste Services needs to check with our Integrity Office and the Office of Contract and Land Management in regards to the e-mails. We don’t want to put anyone’s bid submission in jeopardy,” she said.

 

Current contract has cost the city

The city staff is considering an extension of its contract with Greenstar as a stop-gap until a MRF is built in Austin that can handle the city’s single-stream recyclable materials (meaning consumers don’t have to separate recyclables). The current two-year contract, launched in October 2008, has been criticized for costing Austin money (as of Wednesday, the city owes Greenstar about $2.3 million) at a time other cities have made money on their recycling contracts.

 

While this is going on, a host of companies are separately jockeying for a chance to win a bigger prize: to build and operate a MRF that can process the city’s growing amount of recyclable materials. The city has set a Feb. 9 deadline to receive proposals for the MRF.

 

Gregory has begun arguing that the two contracts – the existing recycling contract and the new MRF — are linked, and the city shouldn’t approve amendments to the first before seeing the bids on the second. He urged the city to reject all the contract extensions offered by Greenstar. Gregory said his company would offer alternatives in its bid for the MRF that would cut the city’s costs and provide flexibility the city is seeking under its current recycling contract.

 

The opportunity presented by the MRF is drawing a swarm of potential bidders. Last Friday, dozens of people – from recycling companies, builders, architects, environmental advocacy groups and staff from numerous city departments — attended a pre-bid conference at City Hall. On Tuesday, officials with recycling contractors toured the city’s old landfill near Bergstrom International Airport, which is being offered as a potential site. In addition to Greenstar and TDS, other companies expected to place bids for the MRF include Houston-based Waste Management, Phoenix-based Republic Services (formerly Browning-Ferris) and Austin-based Balcones Resources.

 

Two different companies

The two companies that have emerged as the most vocal — Greenstar and Texas Disposal Services — are quite different.

 

Greenstar North America is a relatively new company, having opened its U.S. operations in 2007 with its headquarters in Houston. The company is a unit of NTR plc., a privately owned company based in Dublin, Ireland that got its start operating a toll bridge (“NTR” stands for “national toll road”). Greenstar has grown quickly through acquisitions and now has 16 U.S. recycling plants, including five in Texas. “We’re the largest recycler in Texas,” Soriano said. He noted that Greenstar is not a waste hauler — but specializes in the business of processing recyclable materials.

 

In contrast, Texas Disposal Systems has been primarily known as a waste hauler, as well as a landfill operator, since it was founded by Gregory and his brother Jim in 1977. The privately owned company has its headquarters just south of Austin’s city limits, east of Interstate 35 near Creedmoor. One thing that makes TDS different is it devotes part of its land to operating a preserve for exotic animals. The company currently doesn’t have a MRF that can process single-source materials, so the Austin project would represent an entry to a whole new business, Gregory said. He added his company has purchased 1,000 acres adjacent to its existing property — including 250 acres for an industrial park – that could accommodate the MRF.

 

To handle the city’s increasing amount of recycled materials generated by the single-source stream (about 4,400 tons a month), the size of the facility will likely be about 100,000 square feet, Soriano estimated.

 

Currently, Greenstar hauls the city’s recyclable materials to a 180,000-square-foot state-of-the-art MRF it opened in San Antonio in 2008.

 

During an interview at Vollmer Public Relations’ offices in the Littlefield Building downtown, Soriano defended the existing recycling contract. He said the reason the city has lost money while other cities, such as Dallas and San Antonio, have made money on their contracts is Greenstar has 10-year deals with those cities – allowing Greenstar to depreciate its capital costs over a longer term. Also, Greenstar uses nearby MRFs in both cities, which eliminates the costly transportation costs Austin has.

 

Soriano also emphasized that Greenstar would continue to work with the city no matter what the city decides – whether to modify the current contract or not.

 

“They’re not easy decisions,” Soriano said. “There’s the money and there’s the long-term future of the program. I’m confident they’ll make a good decision. And what we’ve told them all along is whatever the decision is, however long it takes to get a facility up and running, we will continue to provide services to the city to make sure the program is always supported properly.”

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