The Reno City Council voted yesterday to consider approving outside legal counsel to review its franchise agreement with Waste Management.
Waste Management faced criticism in August by City Council members for its recycling services and rates being charged to customers.
Agreement Discrepancies
Critics of the agreement, which include city council members, expressed concern about two key issues:
- The construction of a recycling EcoCenter, which Waste Management is contractually obligated to build as part of its agreement with the city; and
- Unfair competition with another recycling company, which alleges that Waste Management is charging businesses less than agreed-upon franchise rates, which undercuts potential competitors and reduces the amount of money the city is collecting on its portion of franchise fees.
Reno City Manager Andrew Clinger said that he has met with both sides and noted what he called a “huge discrepancy” between what both sides are saying.
The council voted to direct Clinger to bring back to the next City Council meeting a contract, to be approved by council, to hire outside legal counsel to review the franchise agreement with Waste Management.
Waste Management’s spokesperson Sarah Polito said that the company welcomes the review of the agreement.
“To have another person provide us with that outside interpretation will be welcomed,” she said.
Mike Draper, who spoke on behalf of Nevada Recycling and Salvage, which filed suit against Waste Management early this year, said that “the confusion around the (franchise) agreement, has left my clients in real limbo. They’re losing potential clients, or current clients, every day. We’re six months into this discussion now … and at some point there has to be resolution.”
Attorney Stephanie Rice of Hardy Law Group, representing Nevada Recycling and Salvage, agreed with Draper and said that Waste Management is engaging in unfair businesses practices.
“Waste Management has made it impossible for anyone else in town to use recycling,” she said.
Rice cited an invoice to a business from Waste Management in January. The price charged to the business for dumpster service was considerably lower than what she said was the agreed-upon franchise rate of $162.98.
The city, Rice added, gets a percentage of what gets charged by Waste Management, so a reduced amount billed to businesses means fewer dollars to the city.
“Waste Management is pushing other people out of the market and obviously taking money out of the city’s pocket,” she said.
Waste Management’s Polito acknowledged that undercharging had been occurring, which she attributed some customers having to be moved into the franchise agreement.
“We’ve been doing audits on those continually to make sure that … all customers are being charged properly under the franchise agreement,” she said. “We are actually going to be doing another audit in the new year.”
When asked if Waste Management would be crediting the city any potential fees owed because of undercharging, Polito said: “I would need to talk with our internal staff, but I believe that we would make it right with the city — absolutely.”
The Lawsuit
Part of the lawsuit against Waste Management alleged that when the agreements with the city were signed in 2012, part of the recycling agreement allowed for Nevada Recycling and Salvage and another company, Castaway Trash Hauling, to provide some recycling services.
Rice said that while the franchise agreements were being ironed out with the city, Waste Management was also negotiations to acquire Castaway, which, she said, would reduce competition for Waste Management.
“Waste Management … conspired with Castaway to essentially create a monopoly and limit competition that essentially would have gone to Nevada Recycling and Salvage had that been done prior to the franchise agreement,” Rice said at a court hearing in July.
District Judge Patrick Flanagan agreed with Rice and granted one of seven complaints in the claims against Waste Management to proceed in litigation. The other six complaints against Waste Management were dismissed either because Nevada Recycling, and co-complainant Rubbish Runners, were not the proper parties to sue Waste Management or because Flanagan did not believe Waste Management violated the law.
“We are moving forward with the remaining claim which is for unfair trade practices / conspiracy to restrain trade,” Rice said.
Polito said that Rubbish Runners and other haulers are not competitors to Waste Management, per the franchise agreement.
“We are the exclusive hauler for all commercial business within the city of Reno,” she said. “Other haulers are allowed to purchase recyclables from businesses, so I don’t see how anything we’re doing would impact them.”
The EcoCenter
City Councilman Paul McKenzie expressed concern yesterday that, as part of the city’s agreement with Waste Management, the company is in violation of the agreement by not constructing a recycling center in Reno.
He said:
“The way that the language is worded, you can say that all they have to do is make an effort to build it. They’re closing recycling centers all over the United States, and to think that they’ve got any intention of building one here, when they’re closing ones in other areas of the U.S. … I don’t think that they’ve got a true plan to do that.
“That’s why they haven’t started construction on it. They were supposed to start construction in March of 2015 at the latest, which they haven’t done,” he added.
The agreement states that:
“Within twenty eight (28) months following the effective date of this agreement, contractor or its affiliates shall use commercially reasonable efforts to commence and diligently prosecute construction of the Eco-Center or similar facilities that will provide transfer, processing, and disposal of solid waste and recyclables. The contractor’s obligations to construct and complete the Eco-Center shall be contingent upon the Contractor’s obtaining all necessary permits and approvals from local, regional, or state authorities necessary for the construction and operation of the Eco-Center.”
The agreement was signed November 7, 2012, more than 36 months ago. In a news release issued by the city April 19, 2013, it was stated that, “the eco-center is expected to be built by December 2014.”
Grary Duhon, outside legal counsel representing Waste Management, said in August that construction was meant to commence by March, which, he said, it was.
“There may have been a few months of delay along the way,” Duhon said. “We weren’t obligated (to finish construction in March). It is being completed as required by the contract.”
Waste Management’s Polito said that the EcoCenter is on track and the company believes it has been abiding by its agreement with the city.
“We have been working diligently since January of 2013 on the construction of the EcoCenter,” she said. “Because we have such a limited footprint, in order to build the EcoCenter we are having to build a new building for our drivers and operational staff. Once that’s completed this month, we will be tearing down their current building and then building the EcoCenter.
“A lot of work has been done. We are confident we have been following contract and have been working hard to get the building constructed and operational. We have been working to follow all policies and procedures as set forth by the planning commission and making sure that … their requirements and requests are being met.
“Those things just take time,” Polito added.
In the meantime, Mayor Hillary Schieve and city councilmembers are getting impatient.
Shieve said, “I guess I’m frustrated because if we’re in a position that was worse than when (Waste Management’s critics) came to us originally… then obviously we have some serious issues.”
