By Mark Gutglueck
Residents and businesses in 217,000-population San Bernardino last month were given a stark reminder of the bare-knuckled political reality that coexists with the multiple layers of corruption encrusting their governmental structure when the city council, over the expressed opposition of all eight of the city’s residents who addressed the issue, rubberstamped providing its franchised trash hauler with the rate hike it requested.
That action followed by slightly more than two years and four months a graft-tainted and rigged bidding process for the city’s trash hauling franchise that ensued in the wake of the dissolution of the city’s sanitation division, which was undertaken as a cost-saving measure. That franchise awarding process, which involved the competitors specifying both their proposed service levels and the givebacks they were prepared to make to the city in terms of franchise and hosting fees, was compromised by a concerted set of conflicts-of-interest on the parts of some city officials and dereliction on the part of others that resulted in the city leaving $19.2 million on the table.
In 2015, while still struggling with structuring its way out of bankruptcy, the city of San Bernardino moved to dissolve its internal sanitation division and create a trash hauling franchise. It sought proposals from a number of trash haulers in the region and conducted a bidding process. In doing so, it set a number of parameters for that competition, which included calling for the isolation of the bidders from all but a handful of city officials and city employees. This was essentially aimed at preventing any of the companies bidding on the franchise from engaging in lobbying activity that would warp or otherwise skew the straightforward evaluation of the benefits on balance offered by the competitors.
Four companies showed enough interest in taking on the franchise to move to a significant point in the bidding process: C R & R, Republic Industries, Athens Industries, and Burrtec. As the competition progressed, C R & R’s and Republic Industries’ proposals grew less competitive and the drive toward determining which company would get the franchise reduced itself to Athens and Burrtec. Both companies made comprehensive proposals, which were subject to vetting and evaluation by then-city manager Allen Parker, then-community development director Bill Manis, and then-sanitation division supervisor Chris Alaniz. Before that evaluation was completed, evidence of Burrtec’s violation of the competition protocol emerged, as the company came into contact with a number of city officials and employees other than the three – Parker, Manis and Alaniz – and the city consultants – Andy Belknap and Richard Tagore-Erwin – designated as those with whom the competitors were permitted to communicate.
One egregious violation of the protocol came on the night of a council meeting when Burrtec employees purchased dinner for the city’s sanitation workers and their families, served it to them in the foyer of City Hall and encouraged them to thereafter address the city council during that evening’s public comment period. Many of those employees and a few of their wives did so, offering their recommendation that the city choose Burrtec as its trash hauling franchisee.
Burrtec was likewise in direct contact with at least some members of the city council.
While the competition was yet ongoing, two of the members of the city council in particular, John Valdivia and Henry Nickel, both of whom had cultivated reputations as being deliberate, fastidious and exacting in their analysis of the city’s financial issues, were conspicuous in leaning in favor of giving the franchise to Burrtec. Nevertheless, independent evaluations of the competing proposals showed that Athens’ offer envisaged a service level in all respects that equaled or exceeded that being proposed by Burrtec while providing the city with financial returns, including the purchase of existing city sanitation division equipment, materials and facilities, comparable or superior to that being offered by Burrtec. Additionally, with regard to a consideration of significant concern to city officials, the future of the city’s 72 full-time sanitation division employees, both Burrtec and Athens were offering to hire them straight across to continue in their trash collection function within the city or elsewhere with those companies. Athens was further offering the city sanitation employees it was proposing to take on participation in the company’s profit sharing plan.
The competition for the San Bernardino city trash hauling franchise came in the aftermath of a 2013 decision by the San Bernardino County Board of Supervisors to end its 12-year relationship with Burrtec as the operator of the county’s landfill system in favor of a ten-year $17 million annual contract with Athens to run the county’s landfills through 2023. At the dawn of 2013, Burrtec had been the undisputed leader of trash handling companies in San Bernardino County, holding trash hauling franchises in 15 of the county’s 24 incorporated cities – Adelanto, Apple Valley, Barstow, Fontana, Grand Terrace, Highland, Montclair, Ontario, Rancho Cucamonga, Rialto, Twentynine Palms, Upland, Victorville, Yucca Valley and Yucaipa. Burrtec also had a contract with the City of San Bernardino, as did Cal Disposal, to service areas of the city beyond the capability of the city’s sanitation division, picking up on the order of four percent of the city’s trash. Burrtec also had franchises in dozens of San Bernardino County’s unincorporated communities, including Amboy, Angeles Oaks, Baker, Barton Flats, Bloomington, Cima, Crestline, Daggett, Del Rosa, Devore, Dumont Dunes, East Highlands, El Rancho Verde, Forest Falls, Fort Irwin, Halloran, Helendale, Hinkley, Kelso, Lake Arrowhead, Landers, Lenwood, Lucerne Valley, Ludlow, Mentone, Mountain Pass, Mt. Baldy, Newberry Springs, Nipton, Oak Glen, Running Springs, San Antonio Heights, Silver Lakes and Yermo.
In 2014, the City of San Bernardino ended its contract with Burrtec for supplemental trash service, although the company did continue to collect trash in San Bernardino on a month-to-month, as-needed basis.
When San Bernardino undertook to privatize its trash hauling in 2015, Athens, which had a heavy presence historically in Los Angeles, Orange, Ventura, Riverside and Kings counties but a far more modest presence in San Bernardino County, was determined to establish substantial trash collecting routes in San Bernardino County to match its relatively newly acquired role as the operator of San Bernardino County’s landfills. Accordingly, Athens took part in the application/proposal process for the San Bernardino franchise, doing so with much commitment and determination. That commitment involved offering customers an enhanced level of service together with franchise fee arrangements so favorable to the city that refuse industry analysts believed Athens’ profit on the contract would be marginal, at best.
Over the first ten years of the franchise, Athens said it would guarantee the city $29,278,968, as opposed to $24,876,468 Burrtec said it would pay the city over that same ten-year period. Athens guaranteed the city $54,348,968 over 20 years as opposed to $35,126,468 guaranteed to the city over the same two decades by Burrtec.
Significantly, however, an evaluation of the competing proposals compiled by Manis and Alaniz that was ratified by a selection committee and provided to the city council 72 hours in advance of the scheduled November 16, 2015 vote on the franchise carried a recommendation that the city award the contract to Burrtec. Initially, based upon their cursory examination of the Manis/Alaniz evaluation and its conclusion, city manager Alan Parker and the city’s management consultant, Andy Belknap, assented in making the Burrtec recommendation. As the critical November 16, 2015 council meeting approached, however, Belknap, prompted with submissions from Athens showing the discrepancies in the Manis/Alaniz evaluation, undertook a more in-depth analysis of the specifics that provided the basis for the decision, and he told Parker that he should do the same. Both determined that the document prepared by Alaniz and Manis omitted mention of multiple aspects of the competing proposals in which Athens had bettered Burrtec. The chief selling point in favor of Burrtec as finally represented to the city council by Manis and Alaniz was that Burrtec made a $6.5 million offer to purchase the city yard where sanitation division-related activities took place. Manis and Alaniz made no mention of Athens’ identical $6.5 million city yard purchase offer.
Simultaneously, Parker was troubled to hear a report that Alaniz was being paid by Burrtec, a report he was at that point unable to confirm. Through his inquiries he did learn that Alaniz had involved himself in posting handbills at the city’s public works yard or otherwise delivering literature to the city’s sanitation division employees that advocated for the city choosing Burrtec as its franchised trash hauler as opposed to Athens.
Based in no small measure on their belief that the heavily excised and selective analysis by Manis and Alaniz did not provide an accurate picture of the competing franchise proposals, Parker and Belknap, referencing the importance of the missing documentation and figures in what had been provided to the council, shifted their position, indicating the issue merited further study.
“We received information both on Friday and today that changed the dollars,” Parker told the city council on November 16, 2015. “That needs to be vetted. One was a $21 million figure. One was a $10 million figure. If we are looking at this from a purely business perspective, we have to respect the money being put into the pot. The dynamics change when the dollars change. They’ve changed in the last 72 hours or so. So from my perspective, we can have a special meeting so it doesn’t drag on for three weeks and such, but I think we need a second look and we need to report our findings on that.”
In his presentation, Belknap had conceded that in terms of revenues coming into the city, Athens offered the superior proposal. Belknap said the ten-year cost and revenue projection his company, Management Partners, had done showed “The differences are not really that great given the size, but there is somewhat more in the Athens ten-year deal than in the Burrtec ten-year deal. If you considered the possible added revenues from Burrtec as well as Athens, they both get better. Athens can talk about the MERF [materials recovery and recycling facility] and a host fee for a ten year deal if they want to.”
Moreover, Belknap indicated Athens had bettered Burrtec in terms of what the two companies were offering the existing sanitation division employees. Both Athens and Burrtec, he said, committed to hiring all 72 of the full time employees who were to be displaced, both were to retain current salary levels and seniority and both offered paid leave, a 401K investment option and medical and dental benefits to the employees and their families. While Burrtec was also offering employment transition compensation, in Belknap’s words, “of about $6,900 per employee to be paid initially or as a bonus or a kind of accrued benefit,” he said that “Athens offered about $10,000 structured over the first year of employment.”
Belknap said the nod had gone to Burrtec based on factors other than what it was offering the city in terms of revenue, primarily that it was more established financially locally, served larger cities locally than Athens and that Burrtec previously had a trash hauling contract with the City of San Bernardino. “Again, we put emphasis on some non-monetary factors that entered into this as well,” he said.
Like Parker, Belknap wanted the council to hold off on its decision so the omissions and discrepancies in the Manis/Alaniz evaluation could be more thoroughly analyzed.
Parker was unable to push that matter through to an ultimate reckoning, however, as he was functioning as something of a lame duck. During a closed session of the city council that day, arrangements were made for him to make his exit as city manager effective December 31, 2015, by the terms of which a full year’s salary, $221,976, plus 12 months of benefits and medical coverage for him and his wife as a severance were conferred upon him.
Over Belknap’s call for the council to hold off on the matter and Parker’s reluctance to have the item voted on that evening, no one on the council seconded councilman Fred Shorett’s motion to postpone the vote for three weeks for further staff analysis of the proposals.
Rather, councilman Jim Mulvihill interpreted the late emergence of information contradicting the Manis/Alaniz findings as Athens sending in previously unprovided information in reaction to the recommendation that Burrtec get the franchise.
Councilmembers Henry Nickel, Virginia Marquez and Rikke Van Johnson, seemingly oblivious to the competition protocol that restricted the franchise candidates from having contact with city employees, cited Burrtec’s effort to reach out to the city’s sanitation division workers and those employees’ positive reaction to that contact as a key distinguishing characteristic between Athens and Burrtec and one of the grounds for awarding the franchise to Burrtec.
Guided by the conclusions of the Manis/Alaniz report as well by councilmen Nickel and John Valdivia, who prided themselves on thorough examination of the city’s financial issues and who made statements to the effect that they had concluded that Burrtec was offering the city a better deal, the majority of the council swung behind awarding the franchise contract to Burrtec. On a motion by councilman Benito Barrios that was seconded by councilwoman Marquez, the council voted 6-1, with councilman Fred Shorett dissenting, to provide the franchise to Burrtec.
The vote provoked an instantaneous firestorm, with widespread accusations that the vote was tainted by graft. As suspicions in that regard grew, city officials, in contravention of the normal practice of providing access to videos of city council meetings, within two days took down the video of the November 16 meeting.
When Manis, who had served as the City of Banning’s economic development director and redevelopment director prior to coming to San Bernardino, was confronted with regard to the report, he begged off, claiming that Alaniz had compiled and authored it.
The events of November 16, 2015 had created what seemed an intractable problem for city attorney Gary Saenz and police chief Jarred Burguan.
At that time, San Bernardino’s city charter bestowed upon the city attorney extraordinary authority and responsibility, by which he had considerable reach in checking council legislative or administrative action deemed inconsistent with state law or local statutes, and the autonomy and power to initiate, at his own discretion, investigation of council action. Saenz was present during the council meetings and witnessed the statements by the city’s refuse workers acknowledging that Burrtec corporate officers had contact with them, an object demonstration that Burrtec had disobeyed the instructions contained in the request for proposal and had violated the city’s bidding protocol. In this way, Saenz was at some level prompted to undertake an investigation into the integrity of the decision-making process with regard to the trash franchise contract, including any conceivable misfeasance or venality on the part of staff and the council in its vote. Yet, he was hamstrung in doing so, since he, with outside counsel, was coordinating the city’s bankruptcy court litigation. Were he to document that in its vote the city council had accepted a less lucrative franchise arrangement than it could have entered into with Athens, Saenz ran the risk of greatly complicating the city’s position in bankruptcy court, as U.S. Federal Bankruptcy Judge Meredith Jury was requiring that the city make every effort to maximize revenue and reduce costs.
Similarly, Berguan, who was in attendance at a virtually all of the city council meetings, was like Saenz a witness to the events leading up to the franchise vote. San Bernardino was rife with reports of improper contact between Burrtec and both Valdivia and Nickel. Like Saenz, Berguan’s authority as police chief empowered him to vector his detective division to undertake an investigation into the circumstance relating to not only his political masters Valdivia and Nickel, but Alaniz as well.
The circumstance pushed Saenz and Berguan into a state of extremity and paralysis, from which they were rescued just a little more than two weeks later, when on December 2, 2015, the massacre of 14 people and the wounding of 22 others at the Inland Regional Center in San Bernardino created an enormous distraction, and close examination of the irregularities surrounding the Burrtec franchise was put on hold.
A little more than three months later, on March 18, 2016, Manis submitted his resignation to the city manager, Mark Scott, who had replaced Parker. Manis’ departure came just as the issue of the granting of the city’s trash hauling franchise to Burrtec was again heating up. Scott, having come to the city in the aftermath of the franchise vote, possessed little in way of an intimate appreciation of the particulars or nuance of that vote. Within weeks of Manis leaving and as the city closed out its sanitation division and Burrtec took on the trash hauling franchise in April 2016, Scott promoted Alaniz to the position of interim public works director.
Eleven months later, with reports circulating around City Hall and the San Bernardino Community that Alaniz was receiving money from Burrtec, Alaniz abruptly retired. Shortly thereafter, it was reported that he had moved into a corporate management position with Burrtec. San Bernardino city officials refuse to disclose details regarding Alaniz’s departure from San Bernardino, saying they are precluded from doing so by public employee confidentiality requirements.
Burrtec’s strategy in capturing the trash hauling franchise in San Bernardino was in large measure an outgrowth of the company’s experience in competing for the trash franchise in neighboring Colton nearly two decades previously. In 1996, the Colton City Council, led by then-mayor George Fulp and councilmen Don Sanders and Abe Beltran, pushed to shutter that city’s sanitation division and outsource trash service. A competitive bid process was held in which several would-be franchisees made proposals. The city utilized an Arizona-based consultant, R.W. Beck, to evaluate the submissions. R.W. Beck delivered its finding that Burrtec was the most qualified and capable applicant and that the quality and range of its service, together with its pricing schedule, represented the best deal for Colton. Before the council ratified that recommendation, however, the council summoned R.W. Beck corporate officer Richard Tagore-Erwin into a closed session, at which Tagore-Erwin was dressed down and threatened by Fulp, Sanders and Beltran, with the four other members of the council looking on. Tagore-Erwin was prevailed upon to rewrite his evaluation, one that offered an alternate conclusion that the second place finisher in the competition, Taormina Industries, had also offered a service proposal that was well suited to the community of Colton. The council then used the second R.W. Beck analysis as the basis for its decision, ratified in a 4-3 vote, to award the trash franchise to Taormina.
Then-Colton Police Chief Bernie Lunsford and then-Colton City Attorney Julie Biggs called for an investigation into the matter, and the city council reluctantly retained former Riverside County Deputy District Attorney Mark McDonald to examine the circumstances that led up to the vote. McDonald returned with a report that the decision-making process on the Colton trash franchise had been tainted by inducements tantamount to bribery that implicated Fulp, Sanders, Beltran, city manager Malik Freeman and assistant city manager Daryl Parrish. Though Fulp would be recalled, Freeman fired, Parrish disciplined and both Sanders and Beltran prosecuted and convicted with regard to other political corruption issues, no action to rescind the awarding of the franchise to Taormina was made, and more than two decades later, Taormina’s corporate successor, Republic Industries, still holds the Colton franchise.
Cut off at the pass in Colton, Burrtec and its owner, Cole Burr, have since taken a leaf out of the Taormina playbook, as they recognize that when it comes to obtaining and maintaining franchises, quality of service and delivering that service at the lowest rate to its customers takes a backseat to influencing politicians and top ranking public officials with the authority to make decisions on the granting of those franchises. Over the last two decades, the combination of Cole Burr, his wife Tracy, who is the vice president of Burrtec Industries, and Burrtec have become the fourth largest contributor to San Bernardino politicians in that timeframe.
In this way, by some interpretations, Burrtec has made the transition from being the victim in San Bernardino County’s pay-to-play atmospherics to becoming one of the victimizers.
Last month, on March 21, an item came before the San Bernardino City Council requesting that its members ratify a 1.92 percent rate hike on trash hauling in the city, effective April 1. A seeming truce had been declared some two years ago in which members of the public had shown themselves to be amenable to letting slide all of the irregularities relating to the granting of the trash hauling franchise to Burrtec, representing a $19,222,500 loss to the city over the next 20 years in comparison to what Athens had offered for the franchise. In that truce, an acceptance of the loss had been made in exchange for freezing the rates the city’s residents are to pay for their trash service. It appears that truce has now been abrogated.
Since 2008, the city has not assented to raising the fees residents pay for trash pickup. On Wednesday, March 21, 2018 the council voted to up from $22.84 to $23.38 the monthly charge to single family residences for trash pickup. It further signaled that it is on track to raise those rates again in July from $23.28 per month to $24.44. Built into the franchise contract was the city’s agreement to allow Burrtec to seek a five percent per year escalation in the rates, an amount considered to be roughly two percent in excess of the commonly accepted three percent annual anticipated rise in the consumer price index.
Members of the city council, confronted by residents angry over the increases, have struck upon a peculiar form of disengagement when confronted about the circumstance relating to the Burrtec franchise and the escalating rates. Councilman Jim Mulvihill, for 37 years a professor of urban planning at California State University San Bernardino and now professor emeritus there and a planning consultant to the San Bernardino Economic Development Authority, feigned ignorance with regard to the range of circumstances pertaining to the Burrtec franchise, and was unwilling to discuss the particulars in the recommendation prepared for the council by Manis and Alaniz in 2015 or the propriety of Alaniz’s departure from the city and his subsequent employment by Burrtec. Nor was he willing to acknowledge any relationship between the issues that clouded the 2015 vote in allowing Burrtect to return less of its proceeds to the city in exchange for the franchise than was proposed by its main competitor, and the contention of some in the community that the company’s rates should therefore remain locked in at their current level.
City employees, as well, seem intent on insulating members of the city council from any potential fallout from the city’s franchise arrangement with Burrtec and shielding them from any accountability with regard to their own personal engagement with Burrtec.
Assistant city manager Teri Ledoux, who was not in place when the franchise was granted to Burrtec, in what was perhaps a reflexive effort to protect the members of the city council to whom she is answerable, sought to discourage questioning of the council on issues relating to the Burrtec franchise in the minutes just prior to the initiation of the March 21 city council meeting. Similarly, police chief Jarrod Berguan has yet to detail one of his department’s investigators to look into the recurrent reports and indications of graft having pervaded the franchise bidding process. Nor has Berguan been shy about using his status as police chief to intimidate or dissuade those seeking to engage the council on the matter.
The Sentinel sought from city attorney Gary Saenz his perspective on the trash franchise irregularities, providing him with a comprehensive set of questions ranging from ones pertaining to Burrtec’s violation of the competition protocol, to the omissions from Manis/Alaniz report, to his office’s action with regard to reports of Alaniz’s efforts on behalf of Burrtec while he was serving in the capacity of sanitation division director, to whether his office had verified reports that Alaniz was being paid by Burrtec while he was still with the city, to whether his office looked into reports of improper contact between Burrtec and both Nickel and Valdivia, to whether the arrangement for Parker’s exit from the city on the day of the franchise vote represented an effort to prevent a fuller range of information from being considered by the council in making the franchise vote, and whether his need, as one of the attorneys representing the city in the bankruptcy proceedings, to protect the city’s position in U.S. Federal Bankruptcy Court prevented him from making an evaluation of the integrity of the decision-making process with regard to the awarding of the city’s trash franchise.
In a brief response before Wednesday night’s council meeting, Saenz said, “I don’t feel there is a lot of merit or substance to the allegations” that there were irregularities in the council’s 2015 trash franchise decision. While he acknowledged that Athens offered the city more money than Burrtec, he said “There was more substance to it than just that. There were certain amounts on the table, what Burrtec was offering and what Athens was offering, but there were conditions and requirements involved, and the council felt entering into the franchise agreement with Burrtec was more prudent, given all the particulars.”
Saenz did not mention Alaniz. Similarly he avoided entirely discussing whether the city’s position in the bankruptcy proceedings prevented him and his office from carrying out an investigation into the integrity of the decision-making process with regard to the trash franchise contract, including any conceivable misfeasance or venality on the part of staff and the council in its vote, since documenting that the council had accepted a less lucrative franchise arrangement than it could have entered into with Athens might complicate the city’s position.
Efforts to engage councilman Valdivia with regard to the trash franchise issue were unsuccessful.
Councilman Nickel for more than two years consistently justified his vote in favor of Burrtec by maintaining that Burrtec’s offer was more lucrative for the city than that made by Athens and that the city’s sanitation workers were in favor of going to work for Burrtec rather than Athens. As recently as March 29, he said, “Each of the operators are capable and costs comparable as it is quite a competitive market. The real deal clincher was the support of our previous waste collection employees for the Burrtec option, many of those employees also being residents of the city. I know a number of them and they still thank the council for going with the contract.”
On March 30, he conceded that Athens offered the city a greater dollar return in terms of franchise and hosting fees, though he yet sought to qualify that, contradicting Belknap, who in 2015 told the council Athens’ offer was guaranteed.
“While Athens did offer more, there was also significant risk associated with the contract, specifically that they were not locally based and among other things could not guarantee their offer,” Nickel said. “Burrtec was local, utilized local facilities and landfills, guaranteed the offered revenue and was determined to be a less risky option.”
A top ranking city official, one who was present during and involved in the dissolution of the city’s sanitation division and the trash franchise competition and awarding, spoke to the Sentinel on the condition of anonymity.
“This was a shady deal from the outset, as underhanded as it could be,” he said. “It wasn’t complicated. Simple math shows Athens was offering more in franchise fees, and not just a little more. We’re talking millions of dollars. This was a dirty Bill Manis deal, through and through. Chris Alaniz should have been more than fired. He should’ve gone to jail.”
The city attorney’s failure to rein the malfeasance in was very disappointing, he said.
“I like Gary [Saenz],” he said. “He is trying to stay on the right side, but he doesn’t like confrontation, and this was one of the times where he needed to be confrontational. He wasn’t.”
The council was culpable, he said, either through gullibility, ineptitude, laziness or worse.
“Virginia [Marquez] and Rikke [Van Johnson] were just plain stupid. I’m sorry,” he said. “They were both juked by the workers coming in and praising Burrtec. That should have never happened. Right there, that was a giveaway that Burrtec was violating the process. The council should have held that against Burrtec instead of rewarding them.”
With regard to Valdivia and Nickel, he said, “There’s no denying and no excuse for what John and Henry did. They’re both way smarter than that. Whenever some proposal comes before the council, they get out their fine-toothed combs and their magnifying glasses and go over every line item. You know when they miss something like $5 million over ten years or $19 million over 20 years, or act like they missed it, something’s up. They were in on it. And Benito [Barrios], he was just following along with whatever John wanted.”
Efforts to reach Michael Arreguin, vice president of Burrtec Waste Industries, did not engender a response. Nor would Arreguin grant the Sentinel access to Alaniz.
On November 16, 2015, the night the council voted to give Burrtec the franchise, Arreguin offered what might for some suffice as a defense of that decision.
“You’ve heard a lot tonight on why some action should be taken that is contrary to what staff and your consultants have brought forward,” Arreguin said. “So I don’t want the council to lose track of the fact that Burrtec Waste Industries is the recommended hauler for the City of San Bernardino, and we did that in a fair and equitable process. We were chosen. And as you’ve heard from the men behind me here [the city’s sanitation division employees] who have served this city for many years in the waste disposal business, they too support Burrtec. They too understand the positions they will have with our company, the benefits that we have offered them even in contrast to some of the dollars that have been thrown in front of them. They have still chosen Burrtec.”
By Mark Gutglueck