The San Bernardino City Council’s November 16 vote to proceed with the dissolution of the city’s sanitation division and approve a ten-year trash hauling franchise with Burrtec Waste Systems continues to resonate controversy, in this case extending all the way to Sacramento as well as within the State Republican Party.
After the City of San Bernardino filed for Chapter 9 bankruptcy protection in 2012, city officials gave serious contemplation to closing out several of the county seat’s municipal divisions as part of an effort to right the city’s listing financial ship. Early talk of dissolving the sanitation department, thereby eliminating costs while simultaneously generating revenue by collecting franchise fees from whatever company the city would then choose to take on refuse handling in the city of 213,000, was never fulfilled as the city’s trashmen, concerned that they would lose their jobs, protested vociferously. But after lingering in bankruptcy for nearly three years, the city was put under the gun by the federal judge overseeing the city’s bankruptcy case, Meredith Jury, to fashion an exodus from its status. In seeking to meet Jury’s requirements, the city earlier this year resolved to close out its fire department and contract with the county to have its fire department provide fire protection service to the city. In doing so, the city fashioned an arrangement by which the entirety of the city will be transformed into a county fire district, under the aegis of which each parcel owner will be assessed $139 district fee, generating an additional $7.8 million of revenue per year that the county is passing back to the city as a pass-thru to the municipal general fund. Emboldened, top city officials resolved once more to undertake an effort to outsource the sanitation division. More than six months ago the city council authorized city staff to undertake that change, and city manager Allen Parker arranged for the city to seek bids, under what is termed a request for proposal process, to determine the interest of trash hauling companies to take on the city franchise. Four companies – Republic Industries, Waste Management, Inc., Athens Services and Burrtec – responded with proposals to the city’s request, which laid out a host of requirement, including franchise fees that would generate for the city at least $5 million in income that could be used to service the debt the city has to its creditors being held in abeyance through the Chapter 9 process, assisting the city toward an exit from bankruptcy. Parker hired the consulting firm Management Partners to assist in the evaluation of the bids. The proposals from Republic and Waste Management were rejected by Parker and Management Partners as not meeting the city’s needs as expressed in the request for proposals, setting up a final competition between Athens and Burrtec. Just four days prior to the November 16 council meeting, the council was given a recommendation drafted by Management Partners and endorsed by Parker which gave Burrtec the nod. But the documentation contained in that report was less than complete, and in some particulars omitted data that clearly favored Athens, while citing unguaranteed revenue to the city offered by Burrtec without considering unguaranteed revenue put forth by Athens A key document within Management Partners’ report which was ultimately relied upon by the council in making its decision totaled Burrtec’s guaranteed and non-guaranteed revenue and compared that to only the guaranteed revenue offered by Athens. Upon discerning this error in the comparative numbers, Athens representative sought to inform city officials. At the November 16 meeting, Parker and Andrew Belknap, a principal with Management Partners, rescinded their endorsement of Burrtec, calling for postponing the vote for a further evaluation of the competing proposals. But that night, scores of city trashmen, who had been heavily lobbied by Burrtec attended the meeting and paraded before the council to tell them that they were strongly in favor of Burrtec obtaining the contract because they had been assured by Burrtec representatives, including owner Cole Burr, that they would not lose their jobs , but be transitioned into being Burrtec employees as part of the franchise arrangement.
The testimonials by the city trash workers on behalf of Burrtec appeared to carry great weight with the council, which ignored the call by Parker and Belknap to hold off on the vote that evening and carry out further evaluations. The council instead went ahead with the vote and by a margin of 6-1, with councilman Fred Shorett dissenting, granted the franchise to Burrtec. Almost immediately, the council and the entirety of San Bernardino City government found itself immersed in controversy, as a thorough analysis of the actual numbers at stake in the franchise competition came under exhausting scrutiny, showing that Athens had offered $29,278,968 in revenue to be returned to the city over ten years, while Burrtec committed to paying the city $24,876,468 during the same decade.
Moreover, after the emotionally charged presentations of the city trash division employees were soberly considered in the light of day, it was pointed out that the request for proposal had expressly forbade any of the applicants from lobbying city employees during the proposal analysis period. It was manifestly clear that Burrtec had violated that element of the protocol, based simply on the statement of the city employees that had so swayed the council.
Then, on November 25, Athens weighed in with a protest in the form of a letter from its law firm, Varner Brandt, which in writing pointed out the violation of bid competition protocol Burrtec had engaged in and further referenced the $4.4 million revenue return differential in the Athens and Burrtec franchise proposals. In a less than subtle manner, the Varner Brandt letter threatened to inform the city’s creditors that the city failed to maximize the revenue return that could have been had from the franchise arrangement. Those creditors have standing in bankruptcy court to make an issue of the city’s failure in that regard with Judge Jury, who thereupon might be disinclined to believe the city’s representations to her that it is doing all it can to remedy its fiscal situation. In the letter, Varner Brandt requested that the city rescind the November 16 trash franchise vote and reconsider the matter in its entirety, using a more comprehensive comparison of what Burrtec offered versus what Athens offered.
With that as the background, the situation worsened and broadened, as reports began drifting in that two of city council members who had supported Burrtec with their votes, John Valdivia and Henry Nickel, had been lobbied to do so by Jim Brulte. Brulte is a former member of the California Assembly and California Senate, where he was the Republican leader in both houses. He is now a high powered lobbyist working out of Sacramento. In March 2013 Brulte was elected chairman of the California Republican Party amidst determination by members of the GOP to change its status as the minority party in the Golden State, where the state legislature is dominated by Democrats and the governor is a Democrat as well. Brulte made nominal progress in that regard and was elected State Republican Chairman once again earlier this year. Both Nickel and Valdivia are Republicans and both have aspirations for higher office. Nickel previously ran for the California Assembly, and has acknowledged that he would run for state office again and might vie for San Bernardino mayor in 2017 if the situation merits that. Valdivia, too, is interested in moving up to the state legislature. Like Nickel, he has not ruled out running for mayor in San Bernardino either. Both Nickel and Valdivia have cultivated reputations of being hard-edged evaluators of how the city’s money gets spent, based upon their sometimes exacting review of city council agenda items, including penetrating questioning of city staff. For many, their willingness to embrace Burrtec’s proposal in the face of Athens offer that would have provided the city with $4.4 million more in returned revenue was inexplicable. Word spread in the aftermath of the November 16 vote that Brulte, who is a paid lobbyist for Burrtec, had counseled both Nickel and Valdivia, telling them that Republican Party money would be vectored their way if they would support Burrtec over Athens in getting the city franchise. The report took on a special sting with particular regard to Valdivia, whose political strategist is Chris Jones. Jones is a close and longtime Brulte associate.
For many, including those in and out of the Republican Party, the report was troubling. Some saw in it an indication that Brulte had improperly blurred the distinction between his private business interests and those of the political party he heads in California. In particular, there was concern that the Democrats might seize on the matter to allege that their Republican rivals were politicizing what should have been a non-partisan evaluation process, not to mention the implication that a high level GOP official was promoting what is arguably a less lucrative franchise arrangement for the City of San Bernardino for personal profit.
When contacted by the Sentinel, Brulte dismissed the report as inaccurate. “I do know both of those councilmembers but I did not lobby anyone on behalf of Burrtec. Burrtec has its own representative in the local area by the name of Mike [Arrequin]. Sorry to end your story there.”
When he was contacted by the Sentinel, Valdivia immediately lawyered up. “You’ll have to call the city attorney’s office for information,” Valdvia said. “I am not willing to provide a quote.”
Nickel was much more forthcoming.
“Both sides, Burrtec and Athens, were very active in their lobbying, but I was never contacted by Mr. Brulte,” Nickel said.
He acknowledged that on paper in terms of money offered to the city Athens made a superior offer. But he said that was not the sole criterion in the decision. “We didn’t just look at dollars and cents evaluations of the franchise. We had to consider what was best for our city. Both offered what met our requirements, which was to satisfy the bankruptcy court with regard to our recovery. Both companies were very close. I am not going to disparage Athens. If you look at the proposals dollar for dollar, they may have had a better proposal but they lacked in other areas, such as getting the good will of our employees. That was something we had to consider. Our earlier effort to outsource ended in failure because we were unable to get the employees to go along. They are both quality companies. They both do a decent job. They both lobbied. We were pressured equally by both companies. Both have contributed money to my political campaign in the past. They both met the minimum requirements we were seeking for recovery. Yes, you can make the argument that going with Athens would have provided us with more money for the recovery. But there were other trade-offs in terms of capacity and providing levels of service. In certain respects, the Burrtec offer was superior. That gave them a certain advantage over Athens. It is a lot like comparing a Cadillac to a Volkswagen bus. They will both get you where you want to go. But one offers you things the other doesn’t and vice versa. It depends on what you want. There are other considerations beside money you have to factor into your consideration. You can get more money but less service. That is a trade-off. The question has to be, ‘What is in the best interest of our city.’ You have to look at all the different aspects of the proposals. I think it is a mistaken approach to just look at dollars. You also have to look at value.”
Nickel insisted, “My decision had nothing to do with running for higher office. I have not talked to Jim Brulte in six or seven months. I last talked to him in regard to other significant issues in the party relating to the leadership in the county central committee. This decision was not informed by Mr. Brulte or a desire for higher office.”
Nickel then took on the issue relating to the lobbying effort Burrtec engaged in with city employees.
“It should be up to the city manager and the city attorney to oversee the proposal process,” Nickel said. “It is not the responsibility of the city council to oversee the proposals. That is a management function and in my mind the responsibility of the city manager and the city attorney to look into any misfeasance that occurred. It is not the city council’s place to second guess and check the work of city employees who are well paid. Nor do I believe I or the council should second guess a legal opinion from the city attorney. If Burrtec violated the requirements of the process than it is incumbent upon the city manager and city attorney to look into that. If they make a determination that something inappropriate was done that is one thing. I have not heard anything substantial along those lines. There were rumors about improprieties by both sides. All kinds of crazy things were being said at the last hour Both sides had a lot riding on winning this contract. They were both very aggressive. I would be very wary of taking one side over the other in making accusations of improprieties.”
Nickel said he believed the city manager had given “both Athens and Burrtec discretion to engage with city employees.”
Nickel vectored at Parker blame for any impropriety or appearance of impropriety relating to the approval of Burrtec.
“Quite frankly, at the end there was a crisis of contrary information that surrounded this vote,” Nickel said. “Why did the city manager suddenly change his position at the eleventh hour? He had had six months to evaluate it. After that much time, the recommendation of someone at that level of responsibility should be rock solid. There should be no ambiguity in that.” Nickel noted that the vote on the trash franchise came the same night Parker was offered in closed session and took a one-year severance package to retire at the end of the year. “Was something being offered to him to get him to change his recommendation?” Nickel asked. “There was something going on at the last minute to change his mind. That is simply unacceptable for someone in a highly paid position, a professional, to suddenly step back from his own recommendation. Something does not smell right. He threw the council under the bus. This boils down to the city manager and city attorney not doing their jobs. We should not be left with the job of doing an evaluation they should have done on our behalf The lollygagging on the part of people in high paying positions we hired is the real scandal. We can’t go through this destructive process of second guessing and micromanaging. No reasonable city in this state would operate that way. People who say the council should be stepping up and doing the job of the professionals in there now is asking us to engage in competitive management. That is no way to run a city.”
Asked if he would support Athens’ call for the vote to be rescinded and the franchise award to be reconsidered, Nickel said he would not support it on his own or put forth such a motion for reconsideration without a staff recommendation to do so.
“If the city manager and the city attorney feel this needs to be revisited, I will listen to them and hear them out,” he said.