A lengthy franchise agreement between the City of Reno and Waste Management, finalized in 2012, continues to generate heated debate among multiple parties.
The Reno City Council this week revisited a financial audit of Waste Management that was originally presented to the council in October. The review, by Las Vegas firm Piercy, Bowler, Taylor & Kern, found that the waste hauler was in compliance in its agreement with the city.
Richard Bowler, of Piercy, Bowler, Taylor & Kern, said: “The result of the examination was that the franchisee is in compliance with the contract as far as payment of franchise fees to the city.”
But the discussion Wednesday at City Hall once again turned sour over a litany of issues about how that agreement has been executed since 2012.
A visibly angry Councilman Paul McKenzie blamed city staff for not providing information about Waste Management’s practices, information he said he has been requesting for months.
“When this was first submitted, I asked for additional information that was not provided,” McKenzie said. He insisted that staff ignored repeated requests for more information. Because of that, he said he did not want to take action this week on accepting the audit.
The audit was discussed during the late October council meeting, but its approval was pushed back to this week’s meeting after council members said they wanted additional information.
Assistant City Manager Kate Thomas replied to McKenzie that she would provide the information now that staff knew he wanted it.
McKenzie said that he made multiple requests of city staff for information, an assertion supported by the public record. He criticized the city’s relationship with Waste Management in August 2015.
“I very much believe that we need to get an independent auditor to audit Waste Management, not only their financials but the recyclable portion of their business so that we can get an independent eye on what’s occurring over there and how they’re living up to the franchise agreement…” he said at the time.
McKenzie then criticized the financial audit of Waste Management at the October 2016 meeting when he said:
“It would appear that the conclusions that (Piercy, Bowler, Taylor & Kern) came to met the requests of the (city’s) engagement letter. But my concern is that the issue that brought rise to our discussion about having an audit was not the refuse as much as it was the recycling.
“We had some statements made in a meeting here talking about increases in recycling but we weren’t seeing an equal increase in franchise (fees) from recycling….” McKenzie added.
A letter in late October, by Waste Management’s Barry Skolnick to Reno Mayor Hillary Schieve and the council, disputed this claim.
The City gets a host fee of 44 cents per ton on all tons of material that pass through the transfer station or recycling facility. The fee paid to the City will only increase should the amount of tons collected increase. Since the introduction of single stream recycling in the second quarter of 2014 through Q3 2016, collected recyclables have increased from 3,166 tons to 4,814 tons. Host fees paid to the City in Q2-2014 were $47,256 and $49,963 in Q3-2016.”
Councilman McKenzie, speaking in October:
“Additionally, we didn’t have a clear (idea) about what was being done with the recycled material. There were concerns that it was being taken to landfill rather than being recycled or that it may or may not have been sent to another facility that the company owns and that we weren’t getting credit for it.”
Mayor Schieve also said in October:
“We were very clear, but I think staff had a totally different idea of what they wanted to see (from the audit) versus what this council wanted to see, and that’s unfortunate. I feel like unfortunately there’s been some differences of opinion.”
This week’s discussion at City Hall didn’t appear to advance confidence in the audit process.
“Without knowing what was audited can we say this audit is complete?” McKenzie questioned. “We can’t tell if there’s appropriate payment (to the city). Until we know that, the audit’s not complete.”
McKenzie said he wanted the auditor to go back and complete the work.
“I asked for it three months ago and I haven’t gotten it,” he repeated.
Councilman David Bobzien said he was frustrated by the process: “We’re in a he-said, she-said (situation) and it’s very frustrating…”
Councilwoman Naomi Duerr also questioned why information she asked for months ago was not provided by city staff.
“Can we get an independent assessment?” she asked.
Recycling on The Rise
The city’s Sustainability Manager, Lynn Barker, defended the financial audit, but a council agenda item for Wednesday’s meeting proposed a new audit of Waste Management’s performance in relation to the franchise agreement.
“Collecting data from Waste Management is standard practice,” she explained. “We do have an opportunity … to take a look at reviewing their operations. It’s in the spirit of process improvement.”
Collection of recyclable materials in the Reno area by Waste Management is on the rise, and Barker said she would like to see recycling increase even more.
“From my perspective this is the most critical issue,” she said, explaining that there is a market opportunity for other recyclable materials in the Reno area, such as construction waste.
She also said that “the contamination rate is very high” for current single-stream recycling materials collected by Waste Management. A city report recommended that Waste Management reduce contaminated recyclables from a current 20 percent to an “acceptable rate” of 10 percent.
“The process has been established,” the report explained. “WM acknowledged that the contamination rate remains high due to driver training issues. Not all drivers are tagging contaminated bins and submitting internal forms to the recycling coordinator. This is WM’s internal process that signals the need to provide customer outreach and education.”
Waste Management spokesperson Kendra Kostelecky said that “our customers are essential in making sure our recycling is not contaminated by keeping these items out of their recycling carts.”
Franchise Agreement’s Intentions Questioned
Mark Simons, attorney for Waste Management, said the company is in compliance with the franchise agreement and would welcome another audit.
Simons also criticized the city for not enforcing its part of the agreement, which he said gives Waste Management exclusivity for collecting recyclable material.
Other waste-hauling companies have been in limbo over a legal interpretation of the franchise agreement, solicited in 2015 by the city, that supported Waste Management having exclusive rights to collect recyclable waste.
(City officials told This Is Reno in May that it was going to start enforcing Waste Management’s exclusivity to collect recyclable materials, but Barker said this week that the city is not doing so, in breach of the franchise agreement.)
“I’m not here to tell you my client is doing anything improper,” Simons said. “Now the city has to look at your failure to comply with the agreement. This city is not enforcing its recycling obligation.
“My client is being harmed by the city’s inactivity. We’ve notified you multiple times of this improper conduct. You’re causing my client substantial harm.”
The company wrote in an October letter to the council and Mayor Schieve that it is losing $40,000 a year because of the city’s inaction.
Mike Draper, who represents the companies Nevada Recycling & Salvage and Green Solutions, countered that the city’s agreement with Waste Management was not intended to give the company exclusivity at the expense of other businesses.
“The agreement specifically called out Castaway’s (recycling) collection,” he said. “The agreement protected that relationship. Shortly upon passage of the agreement, it had been announced that Waste Management purchased Castaway.”
He said his clients, smaller collection companies, are “fighting for their lives. There’s no reason not to adhere to the spirit of the agreement.”
“Breach of Contract”
Barker said that the city is in breach of contract with Waste Management if other waste haulers, such as Draper’s clients, are collecting recyclables. She also cited a lawsuit in which a judge sided with Waste Management over this issue. (The judge’s ruling is being appealed.)
“We are allowed by the Reno municipal code to levy fines (against businesses using non-Waste Management haulers),” Barker said.
The outside legal review of the city’s agreement with Waste Management supported Barker’s claim. Draper said in May that the review was faulty.
“The franchise agreement independent counsel’s interpretation completely ignores and does not reflect the discussion and understanding that took place during the public hearings surrounding the development of the agreements,” he said. “It is extremely inconsistent in its drafting.”
Councilman Oscar Delgado agreed with Draper.
“I think Waste Management does a great job… but that’s a big interest to me that our small businesses are not being impacted,” he said.
People involved with the situation said that the agreement, which took many years to finalize, is poorly crafted, contributing to the problems discussed today.
“It’s a sucky agreement,” one person commented. Council members have criticized it as having “loosey goosey” language.
In contrast, Waste Management’s newly approved franchise agreement with Washoe County implements many of the services that Reno’s does, such as single-stream recycling. The county agreement was praised last week as being more clear for all parties.
This week, the Reno City Council moved to revisit its financial audit of Waste Management in February. Council members also asked city staff to meet with the company to consider continuing to hold off on enforcing the agreement while finding ways to improve it.
Waste Management’s Kostelecky said after Wednesday’s City Council meeting that the company wants the city to enforce the agreement now.