Observations and musings on Jacksonville Politics

Abel Harding: A Meeting With The Mayor & A Trail Ridge Analysis

A week or so ago, I was surprised to get a call from the Mayor’s Office stating that he wanted to meet with me.  According to his staff, he wanted the opportunity to present his side of the Trail Ridge story.  So, I spent nearly with an hour with the Mayor and his staff on a recent Monday discussing the Trail Ridge Landfill.

The first questions the Mayor asked are ones that I’m asked frequently: “Why do I blog?” and “Am I getting paid to do it?” I explained to the Mayor that I’m a believer in open government, in accountability, and in ethics. And no, I don’t get paid. There are no advertisers on this site and I receive no compensation for anything I write.  

The Mayor then began talking about the Waste Management no-bid contract. A little history: Trail Ridge is a 900-acre site off US 301.  There is currently one cell on the site which encompasses 144 acres.  That cell is managed by Waste Management, who had the winning bid in the early 90’s—the last time the City bid out the landfill contract.  The dispute between Waste Management and the City of Jacksonville boils down to a disagreement over the term “life of facility.”  The specific word “facility” appears to be the center of the dispute.  Waste Management alleges that they hold the rights to the entire 900-acre site, while the City contends that the term “facility” is strictly limited to the 144-acre cell currently in use.  As we have discussed before, the City’s general counsel at the time the original agreement was initiated, a Florida Coastal Law School professor, and the City’s current general counsel have all stated that the the contract is limited to the current operating cell.  And both the law school professor and the City’s current general counsel have stated that they believe the City is standing on firm legal ground.

But Paul Harden’s [the local attorney representing Waste Management] previous statement of “suing until the cows come home” to resolve the dispute is one of the Mayor’s most frequently used arguments in his efforts to convince the City Council that the Waste Management deal is the best option for the City.  (This same attorney has also been in the Mayor’s Office strategy meetings to get the Waste Management no-bid contract passed by City Council.) In any case, the Mayor contends that the City’s Office of General Counsel is not equipped to handle a legal battle with Waste Management and the City would be forced to hire outside counsel.  A fine vote of confidence in our General Counsel and his staff, don’t you think?

In addition, the Mayor has argued that all designing and permitting for a new cell at Trail Ridge would be frozen during a legal battle, and there would be a chance that there would not be adequate time for the designing and permitting stage of the new cell before the old cell reaches capacity.  If this were to happen, the Mayor contends that the City would pay roughly $30 million a year to ship its trash out of the county.  But would the design and permitting in fact be frozen? A permit for construction of a new landfill can’t be challenged and held up before it is issued, can it? And the City is the owner of the land, isn’t it? What harm is there in the City doing that work while the parties fight out the interpretation of “facility” in court? As an aside, I stumbled upon an interesting press release for a landfill that was built in Osceola County. It took only five months to get the landfill permit approved, and a year to construct the 1st Phase of the landfill. So it seems that the Mayor is being extremely conservative in saying that it would take longer than 5 years to go through that process. Of course, the Council Auditor believes that the current landfill has another 7 years of life. Certainly that should be enough time to get another cell permitted and constructed. But if not, Peyton’s argument is also weakened by the fact that another landfill, or even new technology, such as a waste to energy processing site, could be built on a new site – other than at Trail Ridge.

Many have said that Mayor Peyton was unfairly left with a Courthouse that the previous administration knew couldn’t be built within the budget that had been allocated for it, and the Mayor has expressed that he shouldn’t put his predecessor in the same position with the landfill.  But, this contract would leave the next generation with a 35 year unequivocable “life of the site contract” – with no opportunity for further review according to the Council Auditor. In addition, there are no rate caps in the contract either. So, as pointed out by the Council Auditor, one or two bad years of inflation could result in exorbitant costs to the City for disposing its trash at Trail Ridge, with no recourse but to pay them.

Of course, the case has also been made that the two issues—the new Courthouse and the Trail Ridge Landfill—are completely infused.  As that line of reasoning goes, the Mayor needs the up-front savings afforded by Waste Management’s proposed contract to fund the construction of the new Courthouse before he leaves office.  If the contract were put out to bid, the Mayor would need to convince the winning bidder to pay a lump sum up front to match the $85 million that Waste Management has promised to deliver during the period remaining in the current contract.  (For the curious, the $85 million number comes from the $20 million in savings that Waste Management is promising in reduced operator fees and avoided escrow costs [the city currently has to put money aside in escrow to cover post-closure costs] for the remaining capacity of the current cell.  There is also $30 million in cost avoidance associated with the closure of the existing cell.  Additionally, Waste Management is promising $35 million in savings by utilizing approved soils from City projects (that includes ash from the City’s cleanup of ash sites)for daily cover at the current cell.) My question is: if Waste Management can operate the landfill under the terms of the new contract so cheaply (and evidently still make a handsome profit), why isn’t the City pursuing the renegotiation of Waste Management’s current contract? Of course, I would hazard a guess that the answer to that question may be dependent upon the terms of the current contract and any reopener clauses it may contain.

Republic Services is Waste Management’s chief competitor, although Advanced Disposal and Waste Industries have also made overtures to the City.  But Republic has pursued the concept of bidding out the Trail Ridge contract rather aggressively, even funding advertisements that cast both Waste Management and the Mayor in a rather unflattering light.  And, Republic Services might have reason to harbor ill will towards Waste Management.  They do, after all, frequently clash when bidding on landfill contracts as the #1 and #2 largest waste companies .

One of the Mayor’s main contentions with having two operators on the Trail Ridge site is his expressed concern over a potential breach of the liner.  If there were to be a breach and toxins were to leak into the aquifer, he said he could envision years of legal battles where the two cell operators battled it out in court over which cell was at fault and had produced the leak.  In a letter delivered to City Council President Ronnie Fussell; however, Republic Services Area President Guy Thompson says that Republic Services would be willing to assume environmental liability for the existing cell built by Waste Management.

Additionally, Thompson stated that Republic would be willing to “maximize landfill capacity”—another key selling point that Waste Management says should help make their case.  (“Maximizing landfill capacity” is something that is achieved by using the V in between the existing mound and the mound that will be constructed.) Please note however that the City and Waste Management have left the site location of the new landfill cell undecided in the proposed contract until after the contract is approved – leaving no guarantee that the new mound will be constructed close enough to ensure a V construction maximizing landfill capacity.

The Mayor contends that the proposed price of $10.21 per ton is less than other counties are paying throughout the state.  For example, Hillsborough County pays $13.91 per ton and Indian River pays $10.66 per ton.  (Indian River’s cost do not include closure costs that are incurred outside of the contract term.)  Waste Management’s proposed price includes closure and post-closure costs in it—something the Mayor believes makes it a very attractive offer.  As pointed out by a City Council member recently though, it turns out that closure and post-closure costs being included in operators’ bids is now a regular industry practice. (The Council Auditor also argues that if the Mayor wishes to include closure and post-closure costs in a bid from other companies, he simply needs to write up a bid spec that asks for companies to bid on these exact services.)  

The Council Auditor sees the cost per ton issue a bit differently from the Mayor, as well.  In his [the Auditor’s] opinion, the City should have secured an even lower rate per ton, specifically because the City agreed to provide fuel for landfill operations—something that the Auditor argues was not fully acknowledged.  In his opinion, the City has now assumed the risk of future price increases in fuel and Waste Management did not adequately lower the price to acknowledge that.  Fuel is relatively inexpensive now, but it certainly wasn’t a year ago and who knows what the price of fuel might be in twenty years.  

Assuming the liability for the cost of fuel is something the City Council should consider carefully when considering this proposal.  In JEA’s recently released report, they comment on the fact that the cost of petroleum coke has gone up by 292% over the past five years, while the cost of diesel oil has increased by 277%.  Who will the City contract with to provide the fuel?  Will it be a separate contract from the one the City currently holds with Gate Fuel Services, a company owned by the Mayor’s father?  How will the City effectively guard against fluctuating costs?  

Finally, one of the options that hasn’t received a tremendous amount of attention is the Council Auditor’s suggestion that the City manage the landfill itself.  While there are up-front costs associated with that avenue, the long-term costs were not too different from the proposed Waste Management contract.  The benefit, obviously, would be that the City would be in complete control of the Landfill and able to pursue any new technologies that came along, without being subjected to legal battles with a contractor. The City would also be free to adjust its costs as inflation tracks up and down, unlike the current Waste Management proposal.

I didn’t come away with the impression that the Mayor exactly relished his role in regards to the landfill issue and who could blame him?  After all, he will have already left office by the time the current contract expires.  And few should envy the position the Council finds itself in as they hold their Committee of the Whole meetings on April 9 and April 23.

There are savings with Waste Management that are “guaranteed” up front.  While Republic (and a few other companies) have said they can provide even more savings.   And so that’s the question the City Council will have to answer—Do they want the benefit of up-front “savings” and run the risk of long term increased costs or would they rather put in the conditions they want in the bid spec, bid the contract out, and see even more savings in the long run?  Are they willing to enter into a contract that has the potential to run for over three decades with a company that appears to have already demonstrated bad faith by carrying out protracted litigation with the City over noise violations and threatening to sue the City if they put the contract out to bid? It currently appears that the majority of Council members favor putting the contract out to bid.

But the Council’s final decision should be interesting. For some, it may be the opening salvo in their own campaign to succeed the Mayor.  They are faced with what seems to be an overwhelming tide of public opposition to the perception that another City contract is being rewarded on the basis of political connections.  They must also decide whether or not the legal threats being bandied about by Waste Management are reason to abandon their commitment to following the City’s procurement policy in putting contracts out to bid. 

Yes, risk exists.  While we often try to do everything within our power to minimize risks, it is something that can never be completely eliminated.  In the end, what remains is one’s conscience and one’s commitment to the long-term financial future of the City.  Each Council Member will have to answer that question for him or herself.

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  1. […] of the ongoing debate.  You can view it by searching their archives.  Or, for my analysis, simply click here.  Whatever your point of view, do make sure that your voice is heard in this […]

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