This week there was an unexpected pivot in the oftentimes cutthroat competitive balance between trash haulers in the largest geographical county in the lower 48 states, as Waste Management Inc., a dark horse in the sweepstakes for the refuse handling franchise in Chino Hills, prevailed against three other finalists for the seven-year contract.
While Waste Management is the largest and by some accounts the most politically connected of all trash companies in the United States, over the last three decades it has lost position and influence in San Bernardino County, while three other companies were either maintaining leverage, expanding or breaking into the garbage-handling fold locally. Nevertheless, while all of the currently better-established companies throughout the 20,105 square mile county jurisdiction have striven for and in some measure obtained dominance within certain circumscribed areas, none has succeeded in achieving a much-desired monopoly. Waste Management capturing the Chino Hills franchise reverses its decades-long contraction in the county, and gives it a renewed opportunity to be a serious player in the region.
Waste Management once had a far larger presence in San Bernardino County than it does currently. It has been the City of Chino’s franchised hauler for more than four decades. Until 2001 it had the trash handling franchise in Upland, but lost that in a bidding competition with Burrtec Waste Industries. In the early to mid-1990s, Waste Management was on a trajectory to land an exclusive right to excavate what was touted as being on the verge of becoming the world’s largest landfill at a location in the Mojave Desert between Amboy and Cadiz in San Bernardino County’s vast outback, to which trash from Orange, Los Angeles, Ventura and western San Bernardino County would be hauled. That plan foundered however, and Waste Management failed in other endeavors in San Bernardino County, such as capturing the contract to manage the county’s multiple landfills and obtaining the trash hauling franchises in the cities of Colton and San Bernardino when those municipalities dissolved their sanitation divisions in 1996 and 2015. Waste Management yet has the trash disposal franchise in Chino and one unincorporated community in San Bernardino County. With the addition of the Chino Hills contract, Waste Management has now reestablished a firm toehold in San Bernardino County, concentrated at its extreme southeast corner.
The primary loser in the Chino Hills City Council’s decision is Republic Industries, the nation’s third largest trash hauler, which until Tuesday’s decision had franchises with three of the county’s cities – Chino Hills, Colton and Loma Linda, in the last of which it functions under the name of CR & R Incorporated. As the now-immediate past franchised trash hauler in Chino Hills, what Republic Industries had at stake in the competition was remaining as a major player in the garbage industry in San Bernardino County, that is, as a company that held the contract for trash hauling in San Bernardino County’s ninth largest city, Chino Hills; its fourteenth largest city, Colton; and its twentieth largest city, Loma Linda. The loss of the Chino Hills contract erodes Republic’s standing and influence in San Bernardino County, perhaps compromising its ability to expand its presence therein. Also losing out were Athens Industries and Burrtec.
For Athens, failing to gain the Chino Hills contract was a serious disappointment, but a less serious blow than the one that Republic sustained in losing the franchise. Nevertheless, Athens had a bit more riding on the competition than did Burrtec. Indeed, going into Tuesday’s meeting, Athens was the odds-on favorite to walk off with the prize, the franchise to serve Chino Hill’s 85,081 population, its roughly 22,000 households and its businesses.
The city staff report on the item considered by the city council recommended that the city enter into a seven-year contract with Athens based upon what was essentially a dollars and cents analysis of the proposals put forth by Athens, Waste Management, Burrtec and Republic Services. According to the report, Athens came out on top when the final proposals for the rate revenue each company projected it would collect annually in the first year of the franchise contract were considered. Athens Services said it was prepared to offer the city’s residents and businesses trash hauling services in the first year for a total rate revenue of $10,508,000. Waste Management projected a total rate revenue of $10,676,000. Burrtec’s and Republic Services’ costs were well off that mark at $12,452,000 and $12,725,000 respectively. Athens Services also proposed the lowest basic per household rate for the city’s residents, at $25.80 per month. Waste Management came in at $26.25. Republic Services, which is currently charging Chino Hills residents $25.02 per month for the service being provided, proposed increasing the monthly rate to $26.45. Burrtec’s proposed monthly charge to residents was nearly off the chart, at $31.44 per month.
An issue that tripped up Republic Services was unrest among its employees, which not only required the company to increase its employees’ wages in a way that caused the company to escalate its rates but within the last two months interrupted trash service to the city that undercut the faith city officials had in the company.
“Recently, the city was impacted by a work stoppage related to labor negotiations involving the city’s current franchise hauler, Republic Services,” the staff report states. “The work stoppage lasted 8 days and caused significant issues for both residents and businesses throughout the city.”
Accordingly, Republic Services was not considered a serious contender and was essentially out of the running since shortly after the second round of the franchise competition began.
City staff gave Athens the nod.
“Staff is recommending city council award the franchise agreement for integrated solid waste management services to Athens Services, subject to completion of outstanding items and minor revisions approved by the city manager and the city attorney, because [it] returned the most cost-effective proposal for the city’s residents and commercial customers,” the staff report states. “Additionally, HF&H [i.e., the city’s consultant assigned to evaluate the competing proposals] and city staff conducted reference checks on the final companies and Athens Services received the highest score overall.”
City officials also said that the city’s ratepayers would save $1.5 million over the life of the franchise by the city granting the contract to Athens rather than the second-place competitor, Waste Management.
After all that, however, three of the four members who voted on the franchise contract bypassed Athens. That decision was based, in the main, on the same reason why only four of the city’s five council members voted on the matter.
Councilman Brian Johsz is employed with Athens Services as a director of government affairs. He did not participate in the selection process based on a legal conflict of interest his participation would embroil him in were he to vote on the matter.
During the first round of competition on the project late last year, while Johsz was yet serving in the capacity of mayor before the council’s December internal reorganization of its leadership posts, seven waste haulers had offered proposals to the city.
Vying with Republic, Athens Services, Waste Management and Burrtec Waste Industries were Valley Vista Services, Ware Disposal, and a joint venture involving Urbaser and American Reclamation.
As it turned out, Valley Vista Services, Ware Disposal, and Urbaser/American Reclamation all underbid Republic, Athens, Waste Management and Burrtec. In a decision that Johsz did not take part in and in which Councilman Ray Marquez dissented, Councilman Peter Rogers, Councilwoman Cynthia Moran and then-Councilman Art Bennett followed a recommendation by the city’s consultant, HF&H, to spurn the three lowest bidders, and instead consider only the four highest bidders.
For many, this was a departure from logic and the standard normally applied in awarding governmental contracts.
Urbaser/American Reclamation had been what could essentially be categorized as the “low bidder” for the franchise contract, having agreed to deliver comprehensive trash service to the city’s customer base for $8.075 million annually. Further, according to HF &H, Ware was the second lowest bidder at $10.084 million, and Valley Vista had the third lowest bid at $10.257 million. Nevertheless HF&H told the council it should only consider the bids from Waste Management at $10.582 million, Athens at $11.242 million, Republic at $12.885 million and Burrtec at $13.483 million. This was because, according to HF&H Senior Vice President Laith Ezzet and Chino Hills City Manager Benjamin Montgomery, Waste Management’s, Athens’, Republic’s and Burrtec’s extensive collection experience in Southern California along with their company sizes and financial resources made them better suited to serve as Chino Hills’ trash hauler.
Somewhat paradoxically, according to HF&H, the consideration that Urbaser/American Reclamation, Valley Vista and Ware were going to charge less than the other four companies indicated they were less suited and less qualified for the franchise. Another factor that favored Waste Management, Athens, Republic and Burrtec, HF&H calculated, was that the Chino Hills trash hauling franchise represented a much smaller portion of Waste Management’s, Athens’, Republic’s and Burrtec’s overall operations, at least in the United States, than it represented to Urbaser/American Reclamation, Valley Vista and Ware.
According to a staff report presented to the city council prior to the November 9 meeting, the amount of money Republic and Waste Management stood to make off of the Chino Hills contract stood at less than one percent of those companies’ total revenue and less than 3 percent of Athens’ total annual revenue. Burrtec did not provide data to make any comparison, but it appears that Chino Hills would represent under 5 percent of that company’s operations if it were to obtain the contract. In the cases of Valley Vista and Ware, the amount of money those companies stand to make off of the Chino Hills franchise is far greater in terms of their overall annual revenue, at 16 percent and 22 percent, respectively. In the case of Ubaser, which has partnered with American Reclamation in California, the Chino Hills franchise revenue would be less than one percent of its earnings worldwide, but would be far greater than that in terms of its revenue from local operations, as the company is just now seeking to establish a foothold in the United States. HF&F and city staff interpret dependence upon Chino Hills for that much of a company’s revenue to be a show of potential weakness, instability and questionable corporate and financial resiliency.
“While the proposal from Urbaser/American Reclamation has the lowest overall cost as measured by total annual rate revenues at approximately $8.1 million, HF&H believes the proposed rates may not be sustainable over the term, particularly since Urbaser/American Reclamation [chose] to offer street sweeping services at no additional charge,” the staff report for the November 9 meeting stated, implying the Urbaser/American Reclamation bid was an unrealistic one. Staff suggested the case was the same with Valley Vista’s and Ware’s bids.
While Councilman Marquez did not buy that reasoning in November, Councilors Bennett, Moran and Rogers did, and Urbasser/American Reclamation, Valley Vista and Ware were eliminated from the running.
There was widespread skepticism about what had occurred. Not just the lowest but the three lowest bidders in the competition had been eliminated in one fell swoop, leaving the company that employed the mayor, which had tendered the third highest of seven bids, in the running. That begat suspicion that the entire bidding process was rigged, such that the council had already dispensed with the lowest bid standard so that in making its final decision the council would not be bound by any objective constraints and would be free to confer the franchise upon the company that put a roof over the head and food on the table of their mayoral colleague.
Ultimately, questions would emerge over the bidding in the second round. Waste Management, which in the initial stages of the competition entered a $10.582 million total annual rate revenue bid, adjusted it slightly upward, in keeping with a recent surge in inflation, to $10,676,000. Athens, however, made no such allowance for inflation, instead moving in the opposite direction by dropping its $11.242 million bid to $10,508,000, more than $160,000 lower than what Waste Management offered to accept per year. Republic, which had been buffeted by the labor strike the week before Christmas, was squeezed to the point that it could only make a modest reduction of the $12.885 million per year bid it made last year to $12,452,000. Burrtec reduced its $13.483 million 2021 bid to $12,725,000. When members of the public considered everything that was at play, particularly the fashion in which Athens was able to tender a bid that was, comparatively speaking, just enough below Waste Management’s to be convincing, the conclusion was that Athens had to be functioning on inside information. Johsz, whose status on the council had been reduced to councilman from mayor when Art Bennett in December was elevated to the mayoralty, might not be participating in the vote that was to financially benefit the company that employed him, people figured, but that did not keep him from signaling to those who needed to know what numbers the competition was coming in at.
According to Assistant City Manager Rod Hill, the second-round bids were due by December 16, 2021. He said that all of the bids were received by that date, but he did not indicate whether the bids were sealed, who at City Hall had access to those bids and whether the Republic, the Burrtec or, in particular, the Waste Management bids had come in before the Athens bid.
If, indeed, the fix had once been in such that Bennett, Moran and Rogers were headed toward ensuring Athens was to get the contract, the heat had grown too great for that eventuality to take place.
Ultimately, the council voted 3-to-1, with Rogers dissenting, to award the franchise contract to Waste Management. Rogers, who favored jettisoning the three lowest bids in November, Tuesday night advocated on behalf of Athens based on it having tendered the lowest bid.
The intimations of impropriety and influence peddling such as those that attended the competition for the Chino Hills trash hauling franchise that was settled this week are a commonality in San Bernardino County with regard to the refuse industry.
In the early 1990s Norcal Waste Systems, Inc. had a contract with San Bernardino County relating to trash and refuse handling at the county’s landfills. Kenneth James Walsh, a vice-president of Norcal, in 1994 began negotiations with the county relating to Norcal assuming control over the county’s landfills, representing an up-rating of the company’s contract from roughly $18 million to more than $40 million. In 1994, Norcal hired San Bernardino County’s former chief executive officer, Harry Mays, under whom the county had entered into the original contract with Norcal, as a consultant. Mays thereafter arranged for the provision of bribes to his successor at the county, James Hlawek, and then pressured him to induce the county to provide Norcal with a more comprehensive landfill management contract. Thereafter, Mays and Hlawek arranged for themselves further personal financial gain from the new Norcal contract. Mays negotiated a more lucrative consulting agreement with Norcal in January 1995. The revised contract provided that Mays and his company, Bio-Reclamation Technologies, Inc., were to receive a $1 million fee when the county approved the Norcal contract, plus additional payments if Norcal’s revenue increased through the issuance of bonds to finance landfill closures. Mays agreed to split Bio-Reclamation Technologies’ fees 60 percent to 40 percent with Walsh. Hlawek’s share of the payoffs was quantified by prosecutors as $227,000.
During 1995, Hlawek used his authority and influence as county administrative officer and chairperson of the county’s negotiating committee to obtain county approval of the Norcal contract. Among other things, Hlawek convinced the county board of supervisors to award the contract without competitive bidding. The county board of supervisors, led by then Supervisor Jerry Eaves, approved the Norcal contract on September 12, 1995.
From 1995 to 2000, the County paid Norcal more than $200 million. During the same period, Norcal paid $4.2 million to Mays and Bio-Reclamation Technologies under their consulting agreement and Bio-Reclamation Technologies, in turn, paid more than $1.1 million to companies owned by Walsh. Hlawek, in statement to the FBI, intimated that bribes had been paid to Eaves, but was not able to quantify those.
Rail-Cycle, a proposed joint venture between Waste Management Inc. and the Santa Fe Railway to haul 21,000-tons of garbage per day produced in Southern California to a 4,900 acre landfill to be established at a location just off the Santa Fe line at Bolo Station east of Amboy in the Mojave Desert was abandoned after reports of bribes being conveyed to Eaves and another member of the San Bernardino County Board of Supervisors, Marsha Turoci, and the simultaneous release of the so-called Miller Report compiled by former San Diego County District Attorney Ed Miller, The Miller Report cataloged Waste Management’s history of unlawful activity in expanding its operations, including intimidation, extortion and bribery of public officials. The Rail-Cycle debacle and the Miller Report precipitated a contraction of Waste Management’s presence in San Bernardino County in the late 1990s and early 2000s.
In 1997, the so-called McDonald Report, written by former Riverside County Deputy District Attorney Mark McDonald, detailed the manner in which Burrtec had offered a superior franchise proposal to take on the trash hauling assignment in Colton when that city closed out its municipal sanitation department in 1996, only to be outmaneuvered by Toarmina Industries, which was subsequently absorbed by Republic. According to McDonald, through “gifts” donations and other gratuities “tantamount to bribery” Toarmina induced then-Colton Mayor George Fulp and councilmen Don Sanders and Abe Beltran to award the contract to Taormina, despite an evaluation done by city consultant R.W. Beck and its principal, Richard Tagore-Erwin, which delineated how the Burrtec service proposal in the franchise bid was superior in all particulars to that provided by Taormina.
In 2015, when San Bernardino shuttered its sanitation division, Waste Management dropped out of the competition to obtain the county seat’s trash hauling franchise early in the process, leaving the field to Burrtec and Athens. 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-Public Works 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. In particular, then-City Councilman John Valdivia, who is now the city’s mayor, made pointed requests of both competitors for campaign money, going so far as to specify that he wanted $10,000 from each. Athens, adhering to the competition protocol and believing such a donation could be construed as a bribe, did not comply with Valdivia’s request. An evaluation of the franchise proposals carried out by Belknap and his company, Management Partners, using ten-year cost and revenue projections, demonstrated that in terms of revenues coming into the city, Athens offered the superior proposal, and that based upon Athens’ salary and employee benefits and profit-sharing arrangement, the city’s sanitation division employees who were to be absorbed by the franchise holder would fare better as Athens employees than as Burrtec employees. The council, however, prompted in large measure by Valdivia and relying on a report attributed to then-Public Works Director Bill Manis which was in actuality written by Alaniz, defied the advice of then-City Manager Allen Parker, who recommended granting the franchise to Athens, and awarded the contract to Burrtec. Subsequently, Alaniz was hired by Burrtec into a senior management position.
At present, Burrtec has plum franchises in the six largest of San Bernardino County’s 24 cities – San Bernardino, Fontana, Ontario, Rancho Cucamonga, Victorville and Rialto. The company also has franchises in ten of the county’s other municipalities – Apple Valley, Twentynine Palms, Yucca Valley, Yucaipa, Adelanto, Upland, Grand Terrace, Highland, Montclair and Barstow. Additionally, it is the franchised garbage handler in the unincorporated San Bernardino County communities of Amboy, Angeles Oaks, Yermo, Victorville, Valley of Enchantment, Twin Peaks, Arrowbear, Baker, Barton Flats, Bloomington, Blue Jay, Skyforest, Silver Lakes, Cedar Glen, Cedarpines Park, Cima, Crestline, Daggett, Del Rosa, Devore, Dumont Dunes, El Rancho Verde, Forest Falls, Fort Irwin, San Antonio Heights, Running Springs, Nipton, Oak Glen, Newberry Springs, Mount Baldy, Mountain Pass, Haloran, Helendale, Hinkley, Kelso, Lake Arrowhead, Lenwood, Landers, Lucerne Valley, Ludlow and Mentone.
Nevertheless, Burrtec suffered a strategic corporate setback in 2013. In the aftermath of the Norcal scandal, the county ended its contract with that company for the management of the county’s landfills. In the 2001 bidding to replace Norcal, Burrtec prevailed. One of the reasons Burrtec had obtained that contract was because the county assumed that Burrtec, as the county’s most prolific garbage hauler, would divert much or all of that trash into the county’s landfills, generating money for the county in the form of tipping fees. By 2010, however, the county was concerned that Burrtec, which owns and operates two landfills in Riverside County, was diverting the lion’s share of the trash it picked up to Riverside County, thereby depriving San Bernardino County of revenue.
The county, after seeking to cajole and wheedle Burrtec into channeling significantly more of the trash picked up in the county into the county’s dumps and failing, opted against extending Burrtec’s contract to run its landfills and put the contract out to bid.
Three companies – Athens, Burrtec and Waste Management – made bids on the contract. At issue in those bids was more than the cost those companies would charge to operate, manage and maintain the county’s waste disposal system, consisting of five active landfills and nine transfer stations. Also considered under the county’s analysis was the amount of revenue each of those companies could generate into the county in the form of tipping fees at the landfills. Athens is the largest trash hauler in Los Angeles County and has trash hauling franchises in Riverside and Orange counties as well.
Burrtec provided the lowest bid – $15.8 million – for the task of operating the landfills. Athens and Waste Management bid $16.687 million and $17.2 million, respectively. The county gave the nod to Athens because that company was able to guarantee that it would import into the county’s landfills 800,000 tons of municipal solid waste and processed green material per year during the 10-year term of the contract, which will bring gross revenue to the county in the amount of approximately $22 million per year. Burrtec was able to guarantee solid waste importation that would provide the county with annual tipping fees at its landfills that were substantially less than that offered by Athens, at $6.3 million.
Despite its primacy as a trash hauler in Los Angeles County, Athens has no municipal franchise in San Bernardino County. For that reason, its corporate executives coveted the Chino Hills franchise, which in this case, because of its employment of a member of the city council, eluded it.
-Mark Gutglueck