By Matt Neznanski
Gazette-Times reporter | Posted: Monday, October 6, 2008 12:00 am
Corvallis can do better, local waste specialist says
Fred Hughes, a Corvallis waste specialist, wants the city to put a hold on automatically renewing its contract with garbage-hauler Allied Waste and look for a better deal.
In December, the city's 10-year agreement with garbage-hauler Allied Waste comes to an end. City staff members are working up a new agreement to allow the company to continue to collect trash from Corvallis curbsides for another decade.
Hughes, a longtime resident who works as a waste-reduction consultant, says the city would be better off asking others to bid on the contract - a move he said could make companies compete to offer better prices and do a better job of reducing waste in town.
"They've been doing a pretty good job, but someone else might do it better," said. "There are a whole lot of groups who are interested in changing the way garbage is handled. Hey, let's open this up to competitive bidding and see."
Hughes went to the city's administrative services committee and asked that the City Council consider extending Allied's franchise for a few months instead - long enough for the city's sustainability coalition to come back with ways to "green up" how Corvallis handles its waste.
On Tuesday, the sustainability coalition will present the results of its 12 work groups focused on a range of topics, including waste management. Hughes is a member of that work group, although he and the coalition insist that Hughes speaks for himself.
Now the race is on to beat the Dec. 31 end of the city's waste collection franchise. The coalition expects to have a formal report for the city that month.
Ward 1 Councilor Bill York heads the committee that first heard Hughes' suggestions. He said despite the imposing 10-year span of the agreement, changes can be negotiated at any time.
"I don't know if it's unfortunate or good that this contract is about to come out at about the same time as the coalition recommendations," he said. "We wouldn't be locked in, but it's certainly easier to make changes before you go into another agreement."
Carol Dion, general manager for Allied Waste in Corvallis, said her company strives to provide top quality services at a fair price.
"Our goal has been, over the last 50 years, to be ahead of the curve, to know what our customers want and to provide that at rates that are competitive," she said.
Charging to do business
In exchange for the right to collect trash and fees within the city, Allied Waste is charged a franchise fee, which amounts to five percent of its gross revenue collected from Corvallis customers. In 2007, that came to $6,557,000 for Allied and $328,000 in general fund money for the city.
Franchise fees are charged to utilities in town at various rates. Telephone, natural gas, cable and electric service providers all pay the fee, which is major revenue for the city. This year, franchise fees brought in $5 million to the city's general fund, an amount that totaled 40 percent of the money available to fund the library, social services, parks and police. Property taxes provide 24 percent of the general fund, said Nancy Brewer, city finance director.
Most of the city's $107 million budget is legally tied to other programs. The general fund, however, can be doled out based on the priorities of the City Council.
So if franchise fees are based on a utility's gross revenue and more revenue means more money for the city, is there a conflict for the city when negotiating how much companies like Allied charge customers?
"I don't think that has ever come into the discussion," Brewer said. "The goal really is to get a good service at a price the community is willing to pay for."
No public bids required
Garbage collection in Corvallis was handled for decades by Corvallis Disposal, a small company that specialized in hauling trash from its hometown.
In 2000, Scottsdale, Ariz.-based Allied Waste Industries - then the second-largest waste collection company in the country - bought the company. In July, Allied was bought by Republic Services, Inc., of Fort Lauderdale, Fla., for $6.1 billion. That sale made Republic Services the second-largest trash hauler in North America, serving nearly 14 million residential, commercial and industrial customers - almost 17 percent of the national market. The two companies officially will combine next year.
Other mid-valley cities such as Albany, Eugene and Salem - among a host of other Oregon cities - operate on a rolling franchise schedule. Under these agreements, franchise agreements are automatically renewed for another year once the initial term expires. These effectively last forever, or until the city or company decide to end them.
"The standard is not to break the agreement without some sort of problem," said Mary Steckel, administrative division manager for the City of Corvallis. "If the services are good and the community is happy, you just renew it again."
And for all city government knows, Allied has been holding up its end of the franchise. A 2007 survey of Allied customers gave the company high marks, averaging 4.7 on a scale of 5 for items including reliability, customer service and courtesy.
This year the company added four new trucks and nearly 22,000 64-gallon roll-carts to automate its recycling service - a move that cost customers 10 percent more in collection rates but allows all material but glass to be placed in the same container.
Further, there's no law requiring that the city put franchises out to public bid. State law allows cities to regulate services that affect the health and safety of citizens, and they may issue franchise contracts with or without bids.
The city Public Works department is already considering several added programs in its negotiations with Allied for the next 10 years, including weekly collection of yard and food waste and requiring bio-diesel trucks or hybrid vehicles in the company's Corvallis fleet.
Giving business options
In Portland, residential garbage is franchised, but commercial and industrial waste is open to competition, which drives down costs to businesses.
George Simons, who owns A.G.G. Enterprises, Inc., a Portland waste-hauling company, said he'd be interested in getting a piece of the Corvallis' market. His company is small, with just 85 employees, but he's still able to do business in a competitive market.
"When you open it up to be able to look at more than one company's offer, you can really get some savings," Simons said.
Allied Waste charges $157 to haul a 30-yard permanent garbage container from an industrial customer in Corvallis. By comparison, Allied charges between $85 and $115 for the same service in Portland, depending on how far the company would need to take the material and how often.
Hughes said with that in mind, the city might not be required to request bids from other companies, but until it asks, it won't get real numbers to compare.
"To me, the only way to get the facts is to let it out for competitive bidding," he said.
Hughes intends to address the full City Council today. The waste franchise agreement is part of the Council's agenda for discussion.
Matt Neznanski can be reached at 758-9518 or matt.neznanski@lee.net