The Hollister City Council on May 17 agreed to hold a 45-day public hearing on the maximum allowable solid waste collection rates charged by Recology San Benito County. The hearing and council vote on a rate increase will take place on July 19.
The rate increase is a contracted adjustment, but it comes after a recent announcement from the San Francisco City Attorney that Recology, along with city employees, committed fraud that resulted in a settlement of $100 million in restitution and fines.
Kathleen Gallagher with San Benito County Integrated Waste Management said at the May 17 meeting the council approved the franchise agreement for the voter-granted monopoly with Recology in November 2018. She noted that it included provisions for a contractually obligated annual rate adjustment process. The adjustment is based on the consumer price index and fuel index and includes disposal and processing costs to determine solid waste collection rates.
Solid waste rates pay for program costs, providing service to meet regulatory requirements and includes collection and disposal of garbage; collection and processing of recyclables and organics; curbside bulky item collection; outreach/education; compost giveaway/electronic recycling/on-site security shredding at Environmental Day events; and quarterly recycling/bulky item collection events.
For the July 1 increase, the maximum allowed rate adjustment is 4.5%. Gallagher said most Hollister residents (58%) have a 32-gallon waste container or smaller, and the maximum allowable rate adjustment results in a $1.45 monthly increase.
San Benito County Board of Supervisors and San Juan Bautista City Council are also holding a hearing for the rate increase.
Recology S.F. pays back $94.5 million in overcharges
The council is continuing to honor the franchise agreement and its pending increase despite the March 4 revelation that San Francisco City Attorney Dennis Herrera had filed a lawsuit against Recology San Francisco. The suit alleges the company was involved in a scheme with Mohammed Nuru, the city’s former public works director, and others, to overcharge ratepayers by more than $100 million.
The lawsuit claimed, “A former employee of the SF Recology Companies, the SF Recology Companies regularly provided gifts of money, meals, and accommodations to City employees with the intent to influence City decisions impacting the SF Recology Companies. Most of those unlawful monetary gifts were hidden from the public view when they were passed through non-profits.”
According to the city attorney’s press release: “Recology will reimburse ratepayers $94.5 million in overcharges and interest as part of a negotiated settlement with the City Attorney’s Office. Under the settlement, Recology will also lower residential and commercial refuse rates starting on April 1, 2021, which will save ratepayers $6.1 million from April 2021 through June 2021. In addition, Recology will make a $7 million settlement payment to the city under the California Unfair Competition Law and the San Francisco Campaign and Governmental Conduct Code.”
The press release also stated, “From 2016 to 2020, Recology and its affiliated companies, Sunset Scavenger Company and Golden Gate Disposal & Recycling Company, regularly provided gifts of money, meals, and accommodations to City employees, allegedly to influence City decisions affecting Recology.”
Herrera did not respond to BenitoLink’s query if the investigation uncovered a possible company-wide corruption issue or if the fraud case involving two Recology executives, John Porter and Paul Giusti, was isolated to San Francisco.
BenitoLink requested comments from Hollister City Manager Brett Miller, County Administrative Officer Ray Espinoza and Kathleen Gallagher, as well as the Hollister City Council and County Board of Supervisors in relation to the San Francisco investigation and $100 million in restitution and penalties.
At the time of publication, only Miller, Hollister Mayor Ignacio Velazquez and Supervisor Peter Hernandez responded. Miller told BenitoLink the San Francisco case was never mentioned during the meeting and he was not aware of it or of any local investigation. Neither Velazquez nor Miller explained why it never came up during the meeting, but Miller did tell BenitoLink that resident Elia Salinas has objected to the contract and the rate increases at meetings more than once.
“If Recology can do this to a major metropolitan city what do you think they can do to a small county that has little or no staff for oversight?” she said.
Velazquez, however, dismissed Salinas as a person “who throws things against the wall and hopes something will stick.” He told BenitoLink, “I’m always looking for corruption and I haven’t seen any signs of anything wrong. I’m often frustrated with some of these contracts, but at the end of the day, they were the lowest bidder.”
In the San Francisco case, city employees did benefit from the arrangement with Recology, according to Herrera’s press release.
Hernandez told BenitoLink that he felt the Recology San Francisco case deserved attention. “In light of this development, we need a deeper dive into the management practices of Recology and how it has impacted our ratepayers,” he said. “I will be pushing for answers.”
Contaminated recycling raises costs
Recology submitted the rate application to San Benito County Integrated Waste Management staff to review calculations. San Benito County is the lead agency for the Joint Powers Authority agreement between it, Hollister and San Juan Bautista, Gallagher said.
According to the agenda packet presented to the council, a cost component that contributed to increasing rates is processing costs due to significant ‘contamination’ in recycling bins (e.g., garbage in the blue recycling bin).
The packet stated processing costs increase when higher amounts of contaminated material are in the recyclables. Residents and businesses are told that those who keep recycling “clean” (e.g., free of garbage) can help reduce processing costs in the future. Integrated Waste Management and Recology continue outreach/education to residents and businesses to reduce contamination and are progressing to route audit checks and notices to customers who continually place garbage in recycling bins.
The documents included the proposed maximum rates each year through 2026 by customer demographics and garbage bin sizes. The most common service afforded residents is one grey bin for trash, a blue bin for recyclables, and a green bin for organic waste. Increased monthly rates from fiscal year 2021-22 to fiscal year 2025-26 are 21.5% over five years or 4.3% annually:
- 20-gallon, $28.47 to $34.61
- 30-gallon, $34.14 to $41.50
- 64-gallon, $58.09 to $70.60
- 96-gallon, $88.81 to $107.95
There will also be annual rate increases for commercial/multi-family service for the 64-gallon and 96-gallon bins over five years.
- 64-gallon, $58.09 to $70.61
- 96-gallon, $88.81 to 107.95
If the rate increase is approved by the council, a notice of public hearing will be sent to Hollister ratepayers and property managers. The hearing will be held at least 45 days after ratepayers receive the notice on Aug. 2.
The city follows “majority protest” proceedings, whereby statements of protest from ratepayers will be accepted through the public hearing date. The council will certify whether the written protests from property owners and tenants in opposition meets the 50%+1 protest threshold needed to defeat the increase. If not, the council would approve adoption of the increased solid waste rates.
Gallagher said the rates can only increase a maximum not to exceed 5% annually.
“The actual rates charged to customers may be lower,” she said. “The current potential rate impact of 4.5% could be 2.1%. The reason being we have met with Brett [Miller] and San Juan’s city manager, as well as the RMA staff to look at additional options and revenue sources to reduce this rate impact.”
The information packet provided to the council showed the proposed rate increases for the next five years through 2025-26.
Councilman Rick Perez asked for clarification concerning possible funding sources to help lower the rate. Miller said the county is looking into whether the federal American Rescue Plan might provide funds to lower the rate. Perez also asked Gallagher if Recology had a program to reduce rates for low-income individuals.
“If a resident qualifies for the Lifeline Program they can apply for the low-income rates,” Gallagher said.
BenitoLink reported in December that Recology does not actively promote the low-income program either on its website or by advertising it, and that less than 3% of eligible customers in San Benito County are enrolled. When BenitoLink called Recology’s office in Gilroy, a customer service representative verified that the information on the low-income program was not online and had not been sent to customers. The representative said customers needed to call the office to get information on how to apply.
If more than 50% of ratepayers do not protest against the new rates, they will become effective July 1. An annual courtesy notice will be sent each year on or before June 1 with the exact rate adjustment information provided to ratepayers. The rate information will also be on the County’s Integrated Waste Management webpage and Recology San Benito County webpage.
According to Dun & Bradstreet, Recology (formerly Norcal Waste Systems) has $1.28 billion in annual revenues. It began operations in San Francisco in 1921. In addition to California, it now has subsidiaries in Nevada, Oregon and Washington, serving more than 670,000 residential customers and 95,000 commercial customers. The employee-owned company operates landfills, transfer stations, and hundreds of recycling programs. Recology’s recycling operations include materials-recovery facilities, recycling of construction and demolition debris, and composting of food and other organic waste.
Other related BenitoLink articles:
Hollister City Council delays decision on waste management choices a third time
Recology offers unadvertised low-income customer discount
Hollister City Council approves new garbage rates
Hollister City Council delays decision on waste management choices a third time
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