Sans Landfill Job, Burrtec Seeks To Lock Cities In On Long Term Pacts

(September 20) UPLAND—Five months after sustaining a major setback when the county elected not to extend Burrtec’s contract for the continued management of the county landfill system, the waste handling company is aggressively moving to shore up and extend its existing contracts with local municipalities, seeking to commit those cities to long term rates that will ensure the company’s prosperity into the coming decades.
But the evolution of the trash industry and the growing reluctance of cities to make lengthy commitments that lock in high rates unchecked by periodic bidding processes is thwarting the company’s strategy to maintain its vaunted position in San Bernardino County. In existence since 1955, Burrtec’s operation in San Bernardino County has steadily grown, as it has gained a trash hauling monopoly in 16 of the county’s 24 incorporated cities and 35 of its larger unincorporated communities. For the last ten years it has been San Bernardino County’s preeminent trash hauler. Prior to that, in 2001, it made a major leap forward when it successfully obtained the contract to run the county’s landfill system, a $17 million per year job that solidified its position as San Bernardino County’s major refuse handler and put it at or near the forefront of trash haulers in Southern California.
But with the county landfill operation contract set to expire this year, the county initiated a bidding process last year in which each competing company’s management rates were considered as but a single component in the bid package, which included the management companies’ abilities to guarantee usage of the landfills. Thus, Los Angeles County-based Arakelian Enterprises, Inc., which operates its refuse hauling and handling business as Athens Services, was selected over Burrtec.
While Burrtec proposed charging $15.8 million per year to run the county landfills and transfer stations and Arakelian/Athens came in higher, at $16,686,700 per year,  Athens committed to importing 800,000 tons of solid waste per year during the term of the contract, which is projected to bring gross revenue to the county in the amount of approximately $22.3 million per year for the duration of the contract, which runs through June 30, 2023, according to the county’s director of public works, Gerry Newcombe.
Athens is able to live up to that guarantee because it has waste hauling contracts in 33 cities in Los Angeles, Orange and Riverside Counties. Burrtec would have brought in 380,000 tons. According to Newcombe, the net annual cost of having Arkelian/Athens run the landfills is thus $362,000 per year while the Burrtec’s would have charged the county  a net $9.5 million.
At this point, Burrtec remains a going concern despite having lost out in the the county landfills management sweepstakes, and retains its trash hauling contracts with the San Bernardino County cities of Adelanto, Apple Valley, Barstow, Fontana, Grand Terrace, Highland, Montclair, Ontario, Rancho Cucamonga, Rialto, San Bernardino, Twentynine Palms, Upland, Victorville, Yucca Valley and Yucaipa and the unincorporated San Bernardino communities of 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.
Nevertheless, Burr-  tec’s loss of the county landfill management contract was an object lesson in how competitive and volatile the trash hauling business can be. For that reason, the company is now looking to consolidate what it now possesses, i.e., its franchise contracts. The company’s game plan  is to convince the cities and communities where it has current franchises  to extend those existing contracts for as many years as possible.
A case in point is Burrtec’s effort to convince officials in Upland to extend that city’s  current contract for trash hauling, which is not set to expire for another seven years. Burrtec is seeking to induce Upland to extend its existing contract by eight years more, thus ensuring that it will remain Upland’s trash hauler for at least 15 years, until 2028. Burrtec is offering to add street sweeping to the trash hauling service it is currently providing as part of that exclusive franchise arrangement.
If Burrtec’s proposal advances and is accepted by the city, Upland will presumably be able to save money by eliminating its in-house cost of providing the street sweeping service. Burrtec would enjoy a triple-fold gain. It would extend its contract by eight years. Moreover, it would eliminate the requirement that it engage in a bid process in another six or seven years to extend the contract, thereby avoiding the possibility that it would need to lower its rates to maintain the contract. And its proposal would increase the rate it charges Upland’s customers by 7.2 percent for the remainder of 2013-14; another 2.1 percent in July 2014; 2.1 percent in July 2015; 2.3 percent in July 2016; and 2.4 percent in 2017.
Whether Upland will accede to Burrtec’s overture is an open question.
The company has cultivated goodwill in Upland on a political level, with several of its principals, including company president Cole Burr, having demonstrated themselves as major donors to the campaign committees of city council members over the years, a practice Burrtec has maintained in all of the cities where it has trash hauling contracts as well as with the county board of supervisors, who sign off on the trash hauling franchises in the unincorporated county areas.
Burrtec has an established reputation for conscientious, thorough and reliable service.
Furthermore, a report by Roseville-based R3 Consulting Group, Inc. with regard to the Burrtec contract extension with Upland offers a somewhat cryptic and elliptical endorsement of the concept and could be used by the council to justify a vote to extend the franchise until 2028.
Nevertheless, a close examination of the consultant’s report betrays that R3 was provided with selective and incomplete information relating to the proposal, primarily information laid out by Burrtec. The report does not provide an exacting analysis of the full implication of contractually binding the city to its current trash hauler for the extended period Burrtec’s proposal envisions.
One factor militating against the city’s acceptance of the contract is a growing trend among municipalities to shy away from long term contracts that stipulate rates or pricing levels that cannot be adjusted downward. Another factor is the no-bid implication of the contract extension. Providing Burrtec with the advantage of specifying a fee and rate schedule that is arrived at outside of a public forum not subject to the downward pressure that naturally comes about during a competitive bid process runs contrary to the concept of open and transparent government and is not in keeping with the principal of looking after the financial interests of the city’s residents. In Upland, where its immediate past mayor is now in federal prison for having solicited and received bribes that involved backroom deals and City Hall-orchestrated favors to those who greased the mayor’s palm, granting Burtec a no-bid contract extension could raise a specter city officials would prefer remains dormant.
And significantly, the terms of Burrtec’s present contract, and any extension thereto, may be disadvantageous to the city. Under the contract, city residents pay Burrtec to haul away not only their trash but recyclable discards as well. Burrtec then sells those separated recyclables at a profit, making money at both ends. In recent years, companies have come into existence which will haul away recyclable material for free, or in some cases, pay to do so, turning a profit entirely on the sale of the materials. While the city is committed until 2020 to remain with the arrangement it now has with Burrtec, beginning in 2021 city residents could see a significant decline in their trash rates if the city contracts with a company that is willing to haul recyclables at no charge or provide customers with a rebate. By remaining with Burrtec under the current terms, such a savings by Upland residents would not be realized.

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