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Garbage Cunning: Palm Coast May Skip Bidding Out $7.7 Million-a-Year Contract

| August 8, 2011

The prize.

There are 32,000 households in Palm Coast. Each pays $239 a year in garbage-collection fees, or the equivalent of two-thirds the median residential property tax bill. For the city, it’s very big business: $7.7 million a year, up from $1.5 million in 2004. And for whichever contractor gets the plum, it’s very good business.

The city pays its contractor $7 million and keeps the rest because it levies a 10 percent franchise fee on the charges, sending $500,000 of that to the general fund. It’s one of the means the city has used to keep its property taxes low: residents typically scream less when the fees go up than when their taxes go up. For the last five years, that contractor has been Longwood, Fla.-based Waste Pro. When Waste Pro got the contract in 2006, garbage fees jumped considerably, as did the city’s franchise fee revenue. That contract is up this year.

The city has the option to re-negotiate and renew for another five years. It can also go out to bid. Going to bid doesn’t preclude the existing hauler from bidding or even winning the bid. It doesn’t preclude the city from sticking with it even if it doesn’t provide the lowest bid, if the city is interested in sticking with a known quantity. But only a bid that several companies will bid and put forth a dollar figure on their offer. For a contract with a potential value of $35 million or more, bidding it out would appear to be the normal route.

Not in Palm Coast. At least not yet, if at all.

Bidding Blahs

“Going out to big sometimes sounds like oh, well, we’ll get the best price,” City Manager Jim Landon told the city council last month, when explaining there would be no bid process just yet, “but it’s not always the case if the company that’s currently doing the hauling feel that there’s a potential for being able to keep the customer. They might even give a better rate versus what you get during the bidding process.”

Instead, Landon sent a “request for information” letter to garbage haulers, inviting them to submit presentations based on a set of precise criteria provided by the city. Just three companies responded: Waste Pro, Republic and Waste Management. Companies don’t thrill at requests for information because they don’t like tipping their hand: the material can be used by their competitor, in this case Waste Pro, to lift its profile when it already has the inside track for re-negotiations.

The city invited the responders each to make a 30-minute presentation to a six-member administrative committee, which included Landon, Public Works Director Richard Adams and Planning Manager Ray Tyner, plus 15 minutes for questions. The presentations, held on July 6, were literally timed. The haulers were also told in no uncertain terms not to contact council members. The presentations, each of which were based on written presentations, were not conveyed to the city council members. Nor were they posted on the city’s website, though they are public information. (They are included in this article.)

City Council’s Choices

“What we have established in this process is to develop a recommendation for city council,” Landon said. Based on those 30-minute presentations, Landon will submit his recommendation to the council on Tuesday, along with three options: stick with Waste Pro and the existing contract, renegotiate with Waste Pro, presumably to get more favorable rates, or go out to bid. Landon said he’d submit “an informational report for city council and a recommendation as to which one of those three options we want to proceed with. It will then be city council’s decision as to renew as is, renew with the new renegotiated contract, or

instruct us to go out to bid and start a formal procurement process.”

Neither the report nor the recommendation—nor the haulers’ presentations—were included as part of the back-up material in Tuesday’s agenda, as back-up material is included for other, more routine (and less consequential) matters.

A Hauler’s Perspective

Landon isn’t wrong about lobbying by any means. One hauler—Republic Services—has openly challenged the process, saying 30-minute presentations, which were not followed up by questions or requests for additional information in subsequent days, isn’t enough to provide a complete picture of a contract of that size, particularly when council members are virtually barred from informing themselves directly.

“We would like to save the city money if we were given the opportunity to bid on the work,” Lee-Catherine Bateh, a marketing manager with Republic, said. Absent a bid the city will never know if it got the best deal or not, she said. “If was in Waste Pro’s shoes and this is my city and they’re considering putting something up to bid and they didn’t do an early renewal with me a year ago or so, I would probably drop their rate a little bit, whatever they want, maybe give more recycling options or do something for them, but if they put out a competitive bid, I’m going to fight very hard to keep it. I’m going to lower my rate even lower.”

What Republic wants most, of course, is what each hauler wants: win the contract. Republic has been going after the prize, and suggesting it could lower rates by going to a single-day pick-up, with larger, 96-gallon trash bins that would be automatically hauled by a single truck driver who would not get out the truck, along with so-called single-stream recycling (which Waste Management is also offering): in other words, no need to split your recycling bins into two batches anymore. Single-day pick-up won’t cut costs in half by any means: trash dumping fees at landfills will remain the same whether trash is picked up four times a week or once a week, and truck costs won’t change. But fewer personnel may well mean lower costs.

Regardless: without dollar figures to go along with their proposal, haulers—and staff and council members—will be speculating on presumed savings.

Landon Lobbying

Landon may have had Republic in mind when he told the council that the lobbying is out there—and when he derisively referred to some of the very services Republic was pitching. “You’ll hear haulers say oh we can cut your costs,” Landon said, “We’ll do one a week service, we’ll do the automatic carts, which nobody can fit into a garage if you have two cars in there so now you have these big ugly carts in everybody’s front yard, but you know, they’ll tell you they’ll cut their costs, but there’s consequences.”

Mayor Jon Netts had no issue with the way the administration was handling the process. “Unless you’re assuming that the city is going to misrepresent the proposals from the waste haulers, what’s the problem?” he said. “I’m sure that every bit of information will be put out.”

“I have no problem with going out for bids, but what happens if your lowest bid is not as good as what you’ve currently got?” Netts said. He said he had not seen any of the haulers’ presentations, nor discussed matters with haulers, but had had general discussions about the contract with Landon—and paralleled some of Landon’s comments about the single-day pickup. Netts said the city several years ago had a pilot project in the B Section of town, using the larger, 96-gallon cans and the automatic trash haulers. At first residents appeared to like it, he said, but then complaints started, and the experiment was not deemed a success. “If all you ever knew was that 96-gallon container, yeah, what the heck, you learn to live with it,” Netts said. “But the change now, people would find it more inconvenient, more time consuming, less esthetically pleasing.”

The city may well want to renew its contract with Waste Pro simply to avoid the difficulties of a transition, which could entail some work for the administration and an adjustment period for residents. The city may also be in negotiations with Waste Pro to lower rates to some extent, but also as part of a plan to increase the franchise fee, which would increase the revenue the city is generating from the contract for its general fund. The city is looking to close a deficit by raising its property tax rate as little as possible. Trash fees have been a cash cow. The cow could be milked a little harder.

“That would not be my approach,” Netts said. “Then you’re getting into smoke and mirrors. Here’s the franchise fee, here’s the service we want. Tell me what it’s going to cost. Give me the best price.”

The Three Haulers In Play

Waste Pro began negotiating with Palm Coast at the end of 2010. “Why go to the expense and time consuming process of bidding this service, not knowing who you’re going to get, and a disruptive transition process when [your] existing contract anticipated a five year renewal, your city officials are very happy with Waste Pro and Waste Pro has made substantial investment and commitment in local infrastructure?” Robert Hyres, the company’s executive vice president, wrote Palm Coast’s administration on June 7 in response to the city’s request for information.

The company’s arguments: it is more locally based than its competitors, owning a state-permitted garbage transfer station in Elkton, 20 miles north of Palm Coast. That facility is now used only for yard waste but is permitted for expansion. It can also sort special waste (such as electronic and fluorescent waste) at its Bunnell truck terminal. The city uses 30 trucks in Palm Coast, including garbage, recycling and supervisory trucks. It did not provide a breakdown of the three categories.

Longwood-based Waste Pro is a young company: it’s been around about 10 years. In 2010, it had $209 million in revenue, and pre-tax profits of $34 million ($21.3 million after taxes), according to its audit.

Its 2010 revenue was up from $189 million in 2009. The company provides garbage pick-up for 113 cities or counties, including Tallahassee (47,000 residential households, $5.1 million annual bill), Daytona Beach (16,400 residential households and 1,200 commercial containers, $7.5 million annual bill) and Deltona (33,800 residential households, $3.8 million annual bill). The company also has a $123 million line of credit from Bank of America.

Houston-based Waste Management is 40 years old. It’s a publicly traded $12.5 billion company with net profits of $953 million in 2010. The company has a Florida subsidiary in Ormond Beach. The national company operates 273 landfills, 16 waste-to-energy plants, 73 landfill gas-to-energy facilities, 90 recycling plants, some 345 transfer stations (three of which are within a 90-mile radius of Palm Coast, including two in St. Johns), and more than 450 collection units, serving 25 million residential and 2 million commercial customers.

Waste Management provides garbage pick-up for Ormond Beach, Holly Hill, Ponce Inlet and 200 municipalities in Florida. The company is playing up its environmental expertise (and its ethics: it made Ethisphere’s list of the world’s most ethical companies in 2008, 2010 and again this year; the list is quite selective.) The company is offering single-stream recycling (it operates 34 such single-stream recycling plants in the nation, its newest one in Tampa).

Phoenix, Ariz.-based Republic is the nation’s second-largest hauler—behind Waste Management. It’s also publicly traded. Its Florida headquarters is in Jacksonville, where it’s building a $16 million recycling facility that should be operational by March. It’s been converting hundreds of routes to single-day pick-up with those 96-gallon cans.

When Port Orange sought bids earlier this year, Republic was among the six respondents. Port Orange’s rate for residential pick-up was $17.26 a month. Republic’s bid was $11.63, but two other bidders came lower: Waste Pro, at $10.90, and Choice, at $9.70. (Waste Management came in at $12.50). Republic included several bidding results in its presentation to make its point that bids alone will ensure the lowest rates—regardless of whether a city wants to stick with a known entity or not.

As it turned out, Port Orange did exactly that. None of the lowest bidders won the contract. The Port Orange City Council three weeks ago, and following several bid protests, voted 3-2 to stick with its existing hauler, Veolia.

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17 Responses for “Garbage Cunning: Palm Coast May Skip Bidding Out $7.7 Million-a-Year Contract”

  1. Justice for All says:

    If the City doesn’t bit the contract, it will NEVER KNOW the real number. Waste Pro is laughing all the way to the bank.

  2. The Truth says:

    Tallahassee has 47,000 households (15,000 more than Palm Coast) yet they pay $5.1 million annually and we have 32,000 households and we pay $7 million annually. What is wrong with this picture?

  3. kickback says:

    I wonder if “kickbacks” are involved here. Certainly hope not

  4. PJ says:

    It’s simple. Put it it out to bid. Get the big garbage cans you get used to them they work great. It stops the blowing litter, rodents and animals from getting in to the trash. As far as service is concerned. Any company that gets the contract can do the job. This is what they do. We are over paying. Look at the Port Orange bids they got big saving. They will save money in Port Orange with out trying. Waste Pro drivers work hard and are under paid. They get a day rate pay and cheated.These hard working workers get cheated on overtime by some loophole that allows you to pay chup change OT under the day labor rate. So these companies can save PAlm Coast money as they ripoff their worker . Don’t fall for the deal Landon go to bid. You will get other companies that can save you money who did not respond to your RFI.

  5. Cyd Weeks says:

    What’s wrong with the picture is that while we’re told we have lower taxes than other counties, they bang us through the utilities. We also have a higher sales tax than Volusia. Smoke and mirrors indeed.

  6. John Smith says:

    Waste Pro will bid on it just like they did when they were going after it yrs ago with Waste Management then after Waste won the bid Waste Pro came to the city and under bid them and got the contract if you all remember. Then raised the rates.



  8. Doug Chozianin says:

    Something is rotten in the City (Council) of Palm Coast!

  9. Rob says:

    The city manager led the gullible to believe that the city had funds to pay for a 10 million dollar city hall. That is 10 million dollars at the beginning. Then when he was called on it he claimed otherwise. All of the town council who was following him in lock step are now scratching their heads and looking up at the sky claiming it was not such a bright idea.

    With that being said how would anyone believe anything the town manager has to say?
    That man should be shown the door as well as the councilors who are up for election.

  10. Johnm says:

    This should be an easy one for the City Council, put the contract out to bid! Waste Pro has the option of bidding as well, so what is the harm. Let’s see what the others can give us. City Council, vote to put this out to bid!!!

  11. PJ says:

    Once again the do nothing city council they can’t even count money! Put it out to bid. Put it out to bid. OR DO IT YOURSELF!

  12. some guy says:

    Come on now you know they ONLY care about how much the city can get not how much they can save all of us.

  13. Smart Lady says:

    The City should put it out to bid now. If you wait to see Waste Pro’s joke of a price in September, then decide to go to bid, the other haulers are at a disadvantage and so is Waste Pro. Waste Pro will have shown a number and the other haulers will know come in underneath that (which is why they won’t show their lowest number during re negotiation). Secondly, if they want to go to bid starting in September, a new hauler will have less time to plan for a transition because the contract expires December 31st. By the time the bid gets put together, sent out, responses are evaluated, and the contract is awarded, you’ll have not much time to get trucks, learn the routes, hire employees (hopefully Waste Pro’s), and get set up. BID IT OUT NOW. IT’S A NO BRAINER!!

  14. Pat says:

    YOU CAN NOT TRUST CITY HALL!!!!!!!!!!!!!!!


    Go out to bid and ask for both once a week pick up and twice a week pick up rates

  16. Hsart says:

    Sorry about my First Comment Above, Dont know what happened to the Spelling, But Unless You Have a Public Works that Includes a Sanitation Dept. Its A No Brainer that it Has to Go Out For Bid!! Growing up in Westchester N. Y. I Started working Sanitation for The Town of Cortland in the Early 70,s. They have Kept their Sanitation Dept. all these Years because of the Mercy you have to Live with Once the Private Companys get in. Your Degree of Service gets LOW and Your Payments Skyrocket ! Kudos to the City of Flagler Beach for their Public Works Depts. Before my Mom Passed away She would always tell us She Felt Very Safe there, From the Police, Meter Reader, to her Trash Men, She knew them all by First Name, and they All Care about what they Do!! All the Private Companys Care about is that Almighty Dollar! Try Calling Waste Pro or Waste Mgt. to come get your Trash if you Didnt get it out on Time!! NOT!! Do ya think if the Animals tear into your Trash their Gonna take 10 min to pick it up? NOT! Then there was the Brainstorm of Past Palm Coast Commisioners to Try a “ONCE A WEEK’ trash pick up!! That Turned out to be OUR Biggest Disaster since the 1985 FIRES!!! Bottom Line is If Palm Coast Does not put your Trash Service out for BID, Someone is Getting Something put in their POCKET!! If Im not Mistaken, the City of Beverly Beach is Contracted to the City of Flagler Beach for their Trash Service and I know for a Fact that the City of Bunnell Tried as Well. Maybe Someone from our City of Palm Coast could take a Trip to the City of Flagler Beach and get a Little Insight on How they Run a Cheaper, Cost Effective, Trash Dept. and Still Maintain the Level of Service they Provide or Better Yet, Maybe we can get them to Pick up Ours!

  17. Jeff Inglehart says:

    Garbage Guy,

    I work for a garbage company that is interested in the bid, and was not invited to the meeting. For obvious reasons I’m not going to identify myself as I don’t know who’s reading this. However; the best option for any community is to bid it out. The way it works is, if we have the contract we try to negotiate to keep it by lowering the price. If we don’t have it we try to convince the decision makers the best thing to do is to put it out to bid. That’s only natyural; try to keep what you have and grow. Dealing with municipalities is very difficult though. We were trying to convince the City of New Smyrna Beach that they should bid out their contract. WPro tried the ‘negotiate with us in private’ bit, but the City Manager wanted to bid it out. At a commission meeting one of the commissioners asked the Asst. City Manager to negotiate with WPro and if they couldn’t get a ‘fair’ price, then put it out to bid. The ACM had no intention of bidding it out – he waited and waited until the bid over in Port Orange was complete because he didn’t want to put out the negotiated number with Waste Pro and New Smyrna Beach because that might have put them at a competitive disadvantage. Plus, he didn’t want to ruin their chances in Port Orange. I’m sorry, but here’s an elected official trying to help a private company win an unrelated bid in a different municipality. I thought elected officials jobs were to look out for THEIR OWN citizens; not help ‘their guy’ win every bid in the area. So, he stalled and stalled until the bid in Port Orange was over. Then they just signed back up with WastePro. Great. Nice job there; Mr. Public Servant….
    By the way, when Waste Pro took the contract over in Palm Coast years ago, wasn’t there about six months of disasterous service that followed before they figured it out. As an experienced garbage guy I can say that’s atrocious; you’re supposed to do your ‘due diligence’ before you start the contract.
    Also, what happens is if you win the contract from someone else you usually hire most of their employees. It only makes sense – they know the streets, the routes and the citizens. So there is no ‘big loss of jobs’ in a community. The same guys show up the next day in different colored trucks….

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