Saturday, November 15, 2014

Oakland's $1 Billion Garbage Contract Goes Back to Waste Management, Competitor Gets Payoff

By Doug Oakley
Staff Writer
OAKLAND -- Waste Management got its $1 billion, 10-year garbage and organics collection contract back after suing the city and starting a voter referendum to get it changed, and will be paying a rival firm more than $15 million to make it happen. 

The Oakland City Council on Monday night voted to give the contract back to Waste Management with six votes, one abstention and one absent. 

In August, the council awarded the contract to Oakland-based California Waste Solutions starting in July 2015. But Waste Management, which had the contract for over a century, sued the city and its rival firm and started collecting signatures for a referendum. 

David Duong, who started California Waste Solutions in 1990, said at a Monday night council meeting that his company was "facing a lot of costs" from the lawsuit as the reason he decided to give the contract back to Waste Management. He acknowledged he will walk away with over $15 million in an agreement inked directly with Waste Management to give up the contract, but he loses $1 billion over 10 years. 

Councilman Dan Kalb said the city handed the contract back to Waste Management because California Waste Solutions wanted it that way. 

"They are recommending these changes," Kalb said. "We picked the local company because they offered us the services we wanted at a lower price, and that's why we did what we did." 

California Waste Solutions will retain its contract with the city for picking up recycling. The deal will expand to $20 million a year for 20 years starting in July of next year. 

Councilwoman Desley Brooks, who abstained from amending the contract, said it set a dangerous precedent. 

"It shows Oakland that when people don't get their way and they have a lot of money, they can do whatever they want," Brooks said. 

In an agreement worked out between the two that does not involve the city, Duong will get $2.5 million for legal fees from Waste Management, a separate payment of $12.5 million from Waste Management that gives it first shot at any recycling contract in Alameda County where the two might compete, and Waste Management will pay Duong for all the garbage trucks he already ordered in anticipation of getting the garbage contract. 

In addition, Waste Management will dismiss its lawsuit against California Waste Solutions and the city, will not turn in signatures it started collecting for a referendum to overturn the contract and will not fight the company's planned expansion of its facilities in Oakland. 

Waste Management also will pay the city $800,000 in legal fees. 

Council members said the good news is that the city got more out of Waste Management than it offered back in the spring when it was competing with California Waste Solutions for the contract, including a smaller monthly fee increase for garbage collection. 

Garbage rates for single-family homes will increase 24 percent in the first year of Waste Management's contract next year to $36.82 a month for a 32-gallon trash can. 

David Tucker, director of community and government relations for Waste Management of Alameda County, said the company now wants to make nice with the city after it dismisses its lawsuit and stops gathering signatures for the referendum. 

"We are fully committed to repairing and improving relations with the city," Tucker said. "It has not been smooth up to this point." 

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