Trash Turmoil Stirs Debate over Competition

On January 18, the Goleta City Council voted 4-1 to increase a garbage consultant’s contract ceiling from $29,955 up to $60,000. To longtime Goleta resident Richard Foster, this made a bad situation worse. Borrowing a trademark phrase from the comedy team of Laurel and Hardy, Foster told the councilmembers this was “another fine mess you’ve gotten us into.”

Staff favored doubling the potential fee, arguing that the consultant had to “spend an inordinate amount of his time … interpreting incomplete and inaccurate customer data” from one of the city’s two haulers, Allied Waste Services. Foster pointed out that the fluctuating consultant fee was part of a larger set of problems based in the council’s 3-2 vote last March directing staff to negotiate an eight-year, single-hauler contract exclusively with MarBorg Industries.

“We should’ve gone to competitive bidding in the first place,” Foster told the council. “Both companies would’ve provided all the information” needed for judging the bids, saving time and money.

This is a logical perception of how competitive bidding should work: The council tells its two trash and recyclable collectors—Goleta has split its territory between MarBorg and Allied (formerly BFI) since before cityhood—to estimate the costs of providing a set of services for a specified time within defined boundaries. Then the haulers battle to offer the most service for the least cost to the ratepayers while still making a profit.

City staff last year originally recommended limited competitive bidding for the northern half of the city, currently collected by Allied, whose contract would end June 30, 2011. This service area alone was worth an estimated $4 million a year to the hauler. MarBorg, who worked the southern side of Hollister Avenue, has a similar contract until 2019.

However, Councilmembers Michael Bennett and Roger Aceves, with support from then-mayor Eric Onnen, elected to change how the garbage game would be played in Goleta. For them, a single firm collecting all of the city’s garbage and recyclable items seemed more efficient and would produce “economies of scale.” The council listened and deliberated for more than two hours to MarBorg and Allied representatives, as well as a dozen members of the public, most of whom supported MarBorg.

As Onnen now recalls his thinking, “We weren’t eliminating competition, and if we could work out the right deal, we wanted to buy local [to help the city’s economy]. It’s up to staff to make sure the terms are the best [for the ratepayers].”

In a recent Grapevine interview, the former mayor admitted that he had second thoughts after supporting a single-source contract with MarBorg. “I recognized the huge pressures on staff. I worried that if they didn’t do everything right, [the deal] could be challenged. There are millions of dollars at stake here,” he said.

The new contract, estimated to be worth more than $60 million over eight years, is said to be complicated and negotiations are incomplete.

In addition, Allied has mounted a vigorous, public attack on the MarBorg negotiation as “anti-competitive,” though last year officials of Allied’s parent company, Republic Services, urged talks with the city to allow them the same privilege. Allied administrators have warned that MarBorg’s campaign to line up county and cities’ service contracts—the firm recently won the sole right to serve Buellton for at least seven years—could eventually create a local garbage monopoly.

Onnen, who co-owns Santa Barbara Airbus, feels more comfortable with the city’s process now because he believes Allied’s proposals amount to de facto competition. “I think we’ll get the best deal possible,” he said, adding that he expects overall rates to drop and services to increase once new terms are settled.

He may have cause for hope if the experience of the Goleta Union School District (GUSD) foreshadows that of the city. Last August, after more than three years of carting away recyclables without charge, MarBorg’s president, Mario Borgatello, added free trash hauling for the eight campuses the company served. “These free services will continue indefinitely,” promised Borgatello.

About the same time, Allied’s general manager, Stephen MacIntosh, matched those free services for the two GUSD campuses serviced by his firm, said Kathy Boomer, school superintendent. She estimated her district’s combined total savings at $125,000 a year, and arranged for both firms to receive plaques of appreciation. MacIntosh added that Allied has long picked up recyclables from its schools, too.

A recently revised MarBorg agreement with UC Santa Barbara simply consolidated four one-year extension options in the original seven-year deal, explained Ron Cortez, the university’s point man for its trash and sustainability programs. Costs for the first three years averaged $955,000 annually, which is about what UCSB projects for each of the next four years. “Our rates stayed exactly the same,” reported Cortez.

However, to gain this agreement MarBorg had to invest in UCSB’s sustainability program: All campus solid waste will be handled in the firm’s Santa Barbara recycling facility; all food and green waste will be collected and composted, with the latter stored in 30 special underground bins; and MarBorg will continue to pay the campus $25 a ton for its commingled recyclable materials. “I think we got a great deal,” said Cortez.

UCSB’s contract was the result of competitive bidding, which is university policy. “The campus has a strong commitment to competitive bidding,” Cortez added. “The solid waste contract will absolutely go to bid when it ends in 2014.”

Clearly there is more than one legal way to handle waste services in the Goleta Valley, and Goleta’s negotiations may produce positive results. But when the City Council majority upended a workable process last March, their discussion skirted important considerations, including the long-term consequences of reducing the potential viability of the area’s waste haulers. Prudence and public perceptions suggest that more care be given to communicating multimillion-dollar public contract decisions than was apparent in this case.