Council Moves Forward on Changes to DWR Franchise Agreement

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Back in September, the current DWR owners notified the city of their intent to sell Davis Waste Removal to Recology.  The city has been asked to waive their right of refusal and, on Tuesday night, despite some misgiving by the URAC (Utility Rate Advisory Commission), the council voted unanimously to move forward with that waiver.

Their other options were to purchase DWR itself and operate it with city staff, or purchase the land assets and then lease it to a solid waste contractor.  Council felt like at this time they were not equipped to set up their own MRF (Material Recovery Facility), however this agreement would give them the option to do so in about a decade.

The Utility Rate Advisory Commission is comprised of eight members, of whom five of them including the chair Gerry Braun spoke on Tuesday at the meeting, along with about 20 members of the public.

Richard McCann told the council, “To be honest, I feel blindsided.”  He explained, “We knew about this…  January 22.  We had a subcommittee appointed to help the staff assess this, they did not inform the subcommittee that this was occurring.  They gave no opportunity for input.

“This is going to have a big impact on rates,” he said.  “Now we’re left with two days in which to make a decision, with no input from our commission.  It might be a good deal, I don’t know, we haven’t been able to see it.”

Elaine Roberts Musser told the council, “This has more been one of process.  This has been more a blind process where citizens really haven’t been given any chance to give input and you have several commissions eager to give input and we can’t because we really don’t know what’s going on.”

Johannes Troost, speaking as a citizen, asked, “Do we need to have a hazardous waste assessment before any sale is made for the building so that we have a bench mark should something come up in the future?”  He pointed out that DWR has had this for 35 years and now Recology would take over.  “I don’t know what the legal issues are but I haven’t seen any financial assessment of what the potential liability is for the hazardous waste that exists now and who would pay for it – or anyone would pay for it?”

Chair Gerry Braun added, “I want to point out one thing, that when this issue first came up, several months ago, the URAC took the initiative to discuss and form a recommendation for the city council on the right of first refusal.

“That recommendation was a unanimous vote of the URAC,” he said. “I have heard nothing in the staff report that refutes the reasoning we gave for that recommendation.”

He said it was a unanimous vote of the URAC “and if you approve the staff recommendation, you will be rejecting the unanimous recommendation of your advisors.”

Jacques Franco said, “You now have an historical opportunity to give us control over the way that we handle waste.”  He noted that DWR has operated for 45 years and has never been subjected to a competitive procurement process.  “Should we give up the control of the Second Street property, I think you can say goodbye to that opportunity forever.  I’m urging you to reject the proposed resolution.”

In this case, the council believes that, due to the confidentiality involved in the discussions over this arrangement, they had information at their disposal that the public did not and they also believe that they will have the opportunity when the Franchise Agreement expires in 2027 to revisit the practicality of the MRF at that time and be in better position to move forward.

Mayor Pro Tem Brett Lee said, “I understand some of the concerns that have been raised at public comment, I think that it’s important that we operate from a similar set of facts – and that doesn’t seem to be the case here.

“We’ve been discussing this item for months,” he said.

He said there are a number of key facts, including “the Franchise agreement expires in 2027.  At that time, we have the ability to choose whoever we want to provide waste collection services for the city of Davis.”

He added, “The people advocating for the purchase of something have no idea what the price is.  How are you supposed to provide a reasonable analysis of the advisability of something if you do not know the price?”  He noted that part of the problem here is “we are bound by confidentiality, we are not able to say what that price is.”

The mayor pro tem noted, “I understand the goal of the city having its own MRF – its own transfer facility where we control the whole process.”  He said even if the URAC and FBC (Finance and Budget Commission) had the full information at their disposal, “given the amounts that we’re talking about, I do not feel comfortable in them having one meeting and making a recommendation… because of the very large quantities of unknowns.”

He said that ten years from now is not that long, but the process to determine whether this is the appropriate step is a multi-year process.  He would add, “I think we’re on a good path at this point.”

Councilmember Rochelle Swanson pointed out, “Owning a facility is a very big responsibility.”  She said, “This is being able to take two years and really look into the entire process, what it would mean, and having an informed decision.  Is it a core function of the city to do that?”

Councilmember Lucas Frerichs noted, “I do think we’re sort of hamstrung by the process particularly with regards to the confidentiality issues.  There have been some items that simply cannot be discussed – some of it has to do with state law.”

Councilmember Will Arnold added, “This is the most frustrating item that I have had to deal with in my short time on the council and that is a lot to say because we’ve had a lot of items where we’ve had a ton of opposition or we’ve been called all sorts of nasty things, but there’s something about this process that has really frustrated me.”

He said, “I feel not just hamstrung during this process but hamstrung right now.  That’s not a place a place where anyone in this community wants to be in terms of policy makers.”

He later noted, “Having a 30 day right of first refusal doesn’t give any of us the opportunity to do the analysis necessary to find out what the financial outcomes would be to do that decision.”  He wants to see them change that 30 day window, but added, “We’re stuck with it for now, but going forward I absolutely think that process needs to happen differently next time.”

Mayor Robb Davis noted in his comments that Valley Clean Energy is an example that these processes, to work correctly, need to be worked out over a period of time to make sure that they are done correctly.

He responded to criticism, “This is the process we went through, we do care about process and we want the community to be involved in it.”  He said, “I’m saying give us time to study…  We can own a MRF at the end of ten years if that’s what we feel we need to do if we can pay for it – through deliberative choices made by the community.  I think that’s better governance.”

He sees this as a multiyear process requiring an analysis of cost, whether the community wants it, build that cost into our rate structure, then an EIR, “those are three to five to seven year processes.  I think that we’re not talking about something in the far distant future.  We’re talking about something – the way I’m thinking about it – is at the end of the current franchise.”

He said, “I think this is the pace which we see change happening.”

The council then passed a motion 5-0 to approve staff recommendation.

—David M. Greenwald reporting



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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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10 thoughts on “Council Moves Forward on Changes to DWR Franchise Agreement”

  1. John Hobbs

    Isn’t Recology the former Norcal Waste, notorious for bribing city officials? Waste removal companies are a favorite business of organized crime because of all the potential to hide “dirty” money with the clean.

  2. Tia Will

    In this case, the council believes that, due to the confidentiality involved in the discussions over this arrangement, they had information at their disposal that the public did not”

    So the bottom line would seem to be that the City Council, while unanimously paying lip service to transparency, adopt yet another process that is anything but transparent. Since this was a unanimous decision, we have no choice but to accept their judgement and hope for the best. But I do want to be clear that the “just trust us” decision making is not a good look, especially while touting transparency as a goal. While this was acknowledged by virtually every counsel member, I would quote an old Turkish saying “Look at the result”.

    If the Council members know that the city simply does not have enough money, or is otherwise limited, why not just come out and say that without providing numbers or otherwise “classified” information? Why the hedging about what may be the case in the future ?  Why the coy comments about having more or different information ? I am not asking these questions rhetorically but would actually appreciate a response.

    1. Matt Williams

      Tia Will said … “If the Council members know that the city simply does not have enough money, or is otherwise limited, why not just come out and say that without providing numbers or otherwise “classified” information?”

      The reason the Council can’t come out and say that the City simply does not have enough money is because the Solid Waste Enterprise Fund (the part of the City that pertains to this situation) does have enough money to purchase the facility and pay the annual borrowing costs.  Recology can not deliver the services required in the Solid Waste contract without a transfer station.  So they would simply rent the transfer station from the City.  The annual rent would be equal to (1) the annual Property Taxes amount, plus (2) the annual debt service costs for the purchase price.

      If Recology purchases the transfer station their annual costs for that purchase will be equal to (1) the annual Property Taxes amount, plus (2) the annual debt service costs for the purchase price.

      Because there has been no transparency we do not know whether staff has presented a fiscal analysis of what (A) the purchase price of the transfer station would be, or (B) how the cash flow from rental revenues from Recology would completely offset the expenses for the purchase.

  3. John Hobbs

    “So the bottom line would seem to be that the City Council, while unanimously paying lip service to transparency, adopt yet another process that is anything but transparent. Since this was a unanimous decision, we have no choice but to accept their judgement and hope for the best.”

    Maybe all of the council members awoke with a GMO in a plastic grocery bag under their their bedclothes or some other offer they couldn’t refuse.(double entendre intended.)

  4. John Hobbs

    This would look cleaner if the city purchased Davis Waste Removal and then sought bids for all or part of the operation. To me, someone with about a decade in municipal waste disposal, this looks like a sweetheart deal, in an industry so rife with corruption. I don’t know the officers of Recology personally but if I was contemplating doing business with them I’d exhaustively research them.

  5. Richard McCann

    I’m sorry that we didn’t have an opportunity for input from the URAC. We will have another chance to review the contract amendment, probably March 9, based on our meeting last night.

    I think the Council was misled on two important issues and that we in URAC have discussed these extensively since October.

    First, the City could have bought the entire operation through the ROFR and then immediately turned around to bid out the operations (and maybe Recology would have bid on that.) That’s really the safest way to guarantee that the City gets competitive bids from operators on a regular basis.

    Second, if Recology still owns the assets in 2027 (or 2032 with the likely contract extension), the City is unlikely to get any outside competitive bids because the new firm will have to buy out the assets of the incumbent, Recology. That will mean that Recology will demand a value that is equal to the expected net profits of the new firm. This incumbency barrier is well known in the industry and across monopoly infrastructure settings.

    I asked at URAC that the contract amendment have ironclad language that if the City decides to build a new MRF, that Recology is required to move from 2nd St. to the new site. The current language talks too much about partnerships and cooperation as though that’s enforceable.

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