The San Benito County Board of Supervisors, and the cities of Hollister and San Juan Bautista, voted during their respective meetings April 16 and 17, to enter into exclusive negotiations with Recology for a new waste management Franchise Agreement amounting to nearly $100 million over 10 years, or averaging about 10 million per year.
The negotiations are contingent on a number of stipulations that Recology must agree to. Two other companies also competed for the contract: GreenWaste Recovery (GWR) and RJR Resource Recovery (RJR RR), which was formed specifically to respond to the RFP.
San Jose-based GWR was put in second place by Hollister but not by the county or San Juan Bautista, although it rated highest in a competition by the evaluation committee. Despite comments made in support of locally owned RJR RR, the selection committee decided upon Recology, which is based in San Francisco.
Each company was scored on a number of criteria. Recology had the lowest total cost, followed by RJR RR and then GWR. From lowest to highest bids, the difference was only 1.6 percent. GWR, however, scored highest overall, while Recology had the highest score on individual criteria related to qualifications, experience, and environmental “enhancements”. When determining each company’s compliance with RFP requirements, GWR was determined to be 100 percent compliant; Recology complied with 89 percent of the RFP; and RJR RR was compliant with 67 percent.
Resident Elia Salinas, who is running for the District 4 Supervisor seat, said at the meeting that within 18 months after receiving the previous contract from the city, Recology increased residential rates, but it is now offering to reduce the rates in order to secure the new contract.
“This is great, but there’s no guarantee they’re not going to raise the prices again and what they’ve done to reduce residential prices is to increase prices for local businesses up to 110 percent,” she said. “Those prices will go to local consumers. It looks great on paper, but the consumers are going to pay for the lower prices to residential.”
A 2016 article and survey in news website SFGate appeared to support her argument. The article stated, “Recology, a San Francisco-based waste collection company that serves San Francisco and many cities on the Peninsula, often hikes its rates when it takes over a contract, or franchise agreement, with a new city.”
Salinas said RJR’s vehicles are registered locally, claiming 41 percent of which comes back to Hollister. “If you go with somebody local, who is already here and established, the money is staying here,” she said. “You should reconsider and go with RJR.”
Vice-Mayor Mickie Luna seemed to bristle at the plea to consider the local company.
“Whatever decision this council makes, we make it for the local people,” Luna said. “We are the Hollister City Council. We’re not making it for the county or any school district. I just wanted to make sure that what I’m hearing tonight is people telling us we should consider the local people. We are doing exactly that.”
Councilman Ray Friend said the process for selecting a company had been going on for the past 18 months and each company had ample opportunity to present their cases.
During the evaluation process, the franchise ad hoc committee—Supervisors Jerry Muenzer, Anthony Botelho, SJB Councilman Tony Boch, former SJB City Manager Roger Grimsley, Hollister Council members Ray Friend and Karson Klauer—met three times in 2017 to review options on an agreement that represents the $100 million commitment, the franchise scope of work, and to pursue a joint RFP process.
“Now we have a selection process and if negotiations fail we need a backup plan,” Friend said. He then added, about the locally based company not in the running, “Personally, I would rather see RJR in second place, but I’m not on the selection committee and they made their decision.”
Company representatives came to each of the meetings to plead their cases. RJR RR, in particular, pointed out that it was the locally owned company, but that didn’t sway Hollister’s city council. It did, however, convince San Juan Bautista’s council and Supervisors Mark Medina and Jaime De La Cruz enough to exclude GWR from automatically being considered.
Emily Finn, director of business development and communications at San Jose-based GWR, reminded the city and county leaders that GWR rated higher than Recology in the competition. She pointed out that the areas where GWR rated higher than Recology, Recology is being asked to match GWR’s capabilities, which, she said, are already in place.
Phil Couchee, general manager of Recology, said it was interesting that RJR RR focused on its employees being local residents. He said many of Recology’s employees, who he described as owners of the company, also live in Hollister.
“Recology and our employees are part of the city,” he said. “Their kids go to school here. They’re active in community organizations and nonprofit groups. They spend their hard-earned dollars at your stores and restaurants.”
Kevin McCarthy, sustainability programs manager at CSG Consultants, which was involved in the selection process, said Friday, April 19 that part of the negotiations with Recology is for them to set up an office in San Benito County so the taxes would go here. As of now, they would go to Santa Clara County. The same would be a negotiable topic with GWR, if it were in further discussions, he said.
McCarthy also explained that revenues to the county and cities would be based on franchise tax fees on each customer billing. For Hollister and the county, the fee is 5 percent. In San Juan Bautista the fee for residents is 5 percent and for businesses 10 percent. Additional income would come from one-time taxes on equipment and property taxes on any facilities within the county.
While all three companies were determined in the evaluation report to have substantial experience and all three could deliver services included in the franchise agreement, the committee’s report said Recology stood out in the competition primarily because, as the incumbent provider, it was already familiar with the county and cities.
Within the similarly-worded resolutions presented at all three meetings was the condition that if negotiations between Recology and the Franchise Agreement Selection Committee (FASC) were to stall, each city and the county—referred to as regional agencies (RA)—would begin negotiating with GreenWaste. Hollister passed the resolution as written, but the San Juan Bautista council and county supervisors amended it to continue negotiations with Recology, with neither competitor listed as a secondary choice, which would result in negotiations having to begin anew.
The final negotiated franchise agreement, including final proposed solid waste and organics rates, will be brought back to each RA member for consideration for approval. The expected start date for the new franchised collection services is Nov. 1, 2018, subject to each RA member approving a short-term extension to the existing Franchise Agreement from July 1, 2018 to October 31, 2018. This is expected to enable sufficient time for the transition of new services.
(See Joint Committee Final Evaluation Report PDF below)