Recycled recommendation: city staff sticks with garbage giant in recycling deal

Waste Management sweetens bid in advance of March 12 council vote; recommended over local nonprofit and current city recycler

As a City Council vote on the Minneapolis recycling contract draws closer, the director of the city's Division of Solid Waste and Recycling laid out her reasons for recommending a controversial garbage giant over a local nonprofit recycler.

The three bidders for the three-year contract are:

  • Waste Management, the nation's largest trash-hauler;

  • Eureka Recycling, the St. Paul nonprofit that handles that city's recycling; and

  • BFI, Minneapolis's current vendor and the nation's second-largest garbage collector.

    Susan Young, director of Solid Waste and Recycling said the bids "were three great proposals. Quite frankly, the worst of them would've been considered heaven-sent by a city like Milwaukee or Chicago or Los Angeles."

    Young has received three bids each from the trio of bidders; the latest consultant report was issued Feb. 14.

    Young said she picked Waste Management's recycling subsidiary, Recycle America Alliance, because of an accumulation of "little things" in its favor. However, she also noted that Waste Management increased its bid by $1.7 million in the final round; Eureka, ranked second by the city, increased its bid by $750,000, while BFI's proposal went up $930,000.

    Waste Management's two-year-old recycling facility has a separate entrance and exit for large trucks, Young said, making it the safest of the three facilities.

    Young said Eureka's facility, open since last April but still with unfinished construction going on in an adjoining building, "is going to be outstanding."

    However, she added that "as an operations person, I know that it takes a full year, all four seasons, to shake stuff down."

    Young said that when she brought in outside consultants to examine BFI's facility, "they were pretty appalled" by the many blind corners, which could be hazardous for drivers and other workers.

    "I've never heard that before," BFI District Manager Paul Rosland said. "We haven't had any accidents. One thing I would say is that the facility has gone 827 days without a lost-time injury over almost three years."

    Young said that there was a fatal accident at the BFI facility three years ago. "I know the bitter and the better about BFI," she said.

    Young said BFI's proposal was the least-detailed of the three she received; Eureka's was good, but Waste Management's was "very detailed, very well thought out. They had a very good strategic vision for their marketing [of recycled commodities]."

    Young noted in her Feb. 12 report to the City Council's Transportation and Planning Committee that Eureka might have difficulty securing a performance bond for the contract (the bond protects the city in case a contract can't be fulfilled).

    Eureka CEO Susan Hubbard said her company has a strong commitment from its bonding company to issue a bond that will cover the length of the contract.

    Hubbard said, "They're basically saying we're risky because we're not big and don't have deep pockets. I think there are people on the City Council that are uncomfortable with that theory of how a city should run; that we shouldn't work with organizations or businesses where somebody doesn't have the cash collateral for performance bonds."

    Last year, Waste Management had revenues of over $15 billion and BFI had revenues of over $5 billion, while Eureka took in over $4 million. However, the two behemoths have had their problems with the Environmental Protection Agency, the Securities Exchange Commission and others.

    In 2001, Waste Management agreed to pay shareholders $457 million to settle a class-action lawsuit alleging violations of securities laws.

    According to the U.S. Securities and Exchange Commission, Waste Management's profits were overstated by at least $1.7 billion from 1992 to 1997 by its auditor, the now-bankrupt Arthur Andersen, LLP accounting firm.

    BFI paid over $5 million in fines and restitution for illegal disposal of wastewater sludge in West Chester, Pa. in 1997; a year later, it paid another $1.5 million for violations of the Clean Water Act in Washington, D.C.

    In 1996, BFI and Waste Management were cited by the Justice Department for committing antitrust violations together.

    Sixth Ward City Councilmember Dean Zimmermann said of the pair: "You've got two giant, multinational corporations there, first cousins to Enron, who are in the business of making money. And they're competing against a homegrown company who's in the business of recycling."

    Eureka is a nonprofit spin-off of the St. Paul Energy Consortium. Between the two organizations, they managed St. Paul's recycling from 1986 to April 2003, when Eureka moved from management into hands-on recycling by acquiring and operating a fleet of 14 biodiesel recycling trucks.

    Eureka's St. Paul contract was renewed in 2001 to run through 2013.

    Young said that she had been surprised by how much attention the recycling contract has gotten from the public. City Councilmembers have reportedly been receiving e-mails -- some of them recycled -- as well as phone calls and letters on the subject; most advocating that Eureka be chosen over its multinational competitors.

    "People are very passionate about their trash in Minneapolis," Young said. "It's near and dear to our hearts."

    The City Council is scheduled to make a decision on its recycling contract at its Friday, March 12 meeting.