Whose job is it to take out the trash?

It is a question the city of Waxahachie hopes to have an answer for by the end of the month.

IESI Corporation, the private firm contracted to collect solid waste and recyclables in Waxahachie, has notified the city it intends to terminate its franchise agreement to provide solid waste collection services on Oct. 1, claiming the city has breached its contract by allowing other haulers to serve industrial customers.

John Gustafson, IESI vice president and regional manager, noted that under the contract, IESI is the only waste provider authorized to serve 7,l00 homes and approximately 500 businesses or commercial accounts in the city.

“The city has allowed other haulers to serve industrial customers in violation of the agreement making the overall contract unprofitable,” Gustafson said. “These violations have cost us more than $250,000 in lost revenues since the start of 2007.

He added the city is also losing revenue because IESI is paying 10 percent of its revenues to the city in franchise fees and the other unauthorized haulers servicing the industrial customers are not required to pay this amount.

“We have attempted to get the city to enforce the contract since last April,” said Gustafson. “However, unauthorized haulers continue to serve numerous customers without city intervention.”

He added IESI has offered to continue providing trash pickup — but only if the city makes up for the shortfall in revenue.

“Without the exclusive rights to service the industrial customers, the residential and commercial rates will have to increase,” Gustafson said.

The city denies IESI’s claim.

“IESI has stated that the city of Waxahachie has allowed other haulers to serve industrial customers in violation of our agreement,” said Paul Stevens, Waxahachie city manager in a press release issued Tuesday afternoon. “We have not allowed this to occur. In fact, we have worked diligently to address these issues when they have been brought to our attention.”

Stevens added the city hopes to amicably resolve the situation without litigation.

“The city council’s main goal is to remedy this situation without any disruption of solid waste service to our citizens and businesses,” Stevens said. “City attorney Steve Chapman and special counsel Terry Morgan have been charged by the city council to request a meeting with IESI’s representatives to pursue resolution of this extremely important matter.”

Stevens confirmed IESI had contacted the city earlier this in regards to unauthorized haulers, but said when those incidents were brought to the city’s attention the matter was resolved quickly.

“We sent (director of environmental health) Sonny Wilson out to investigate the locations. The hauler thought he was outside the city limits. Sonny told him to get the containers out. They were removed and IESI was told to contact the customer about putting in their container,” Stevens said. “Every incident (of an unauthorized hauler operating within the city) that has been brought to our attention has been taken care of and we will continue to work with IESI to enforce the contract.”

Privatizing waste

collection

In 2001, the city council voted to privatize solid waste collection, which was previously being handled by the city.

A 10-year contract was awarded to Best Disposal, a subsidiary of IESI Texas Corporation. In addition to providing exclusive solid waste and recyclable collection for all residential and commercial properties in the city, the contract allowed the company to petition for an annual rate increase based on the consumer price index of the Dallas-Fort Worth Metroplex area.

When fuel prices rose significantly two years ago, the city authorized a significant adjustment increase above the consumer price index to help IESI compensate for the rise in gasoline prices.

Also in 2005, IESI petitioned the city to charge a rental fee for roll-off containers because customers were request and hold a dumpster for extended periods of time without filling them up or requesting a pick-up. To offset those expenses, the council authorized IESI to impose a rental fee for solid waste containers.

The contract also allows IESI to petition for increased compensation required to meet changing state or federal regulations that did not exist at the time of the contract.

Rate increase approved

According to the U.S. Department of Labor Bureau of Labor Statistics, the adjusted CPI for the area rose by .825 percent during the past year.

In June, both IESI and Republic (the landfill which accepts city waste) issued letters to the city formally requesting the CPI increase — Republic requesting an .825 percent increase and IESI requesting a 1 percent increase in rates charged to the city for services.

During Monday’s council meeting, when the issue of the annual CPI rate increase was brought forward by Waxahachie director of environment health Sonny Wilson, Mayor Pro-Tem Ron Wilkinson asked for the letter from IESI to be read on the record.

“IESI would like to take this opportunity to express our appreciation for your business. Per our contract with the city of Waxahachie, we would like to present to you our annual request for the 2007 rate adjustment. The amount is based on the published Bureau of Labor Standard Consumer Price Index/Urban Consumers (CPI-U Dallas/Fort Worth) May 2007. The amount of the request for 2007 is equal to 1 percent,” Wilson read, adding they rounded up the rate increase to a full 1 percent opposed to the .825 percent.

“When was that letter dated?” Wilkinson asked.

“June 20, 2007,” Wilson responded.

“Did they ask for anything else or note there were any other problems or concerns with their contract to the city?” Wilkinson asked.

“No, sir,” Wilson said. “As far as I knew everything was going fine.”

The motion was made by Wilkinson and seconded by Councilor Joe Gallo to approve an .83 percent rate increase adjustment for both IESI and Republic as outlined under the terms of the contract. The motion was passed by unanimous vote.

Pending litigation

IESI provided the Daily Light with correspondence between the company’s Fort Worth legal firm of Kelly Hart & Hallman LLP and the city.

In a letter dated Aug. 21, attorneys representing IESI threatened legal action unless the city amended its franchise agreement in order to recover losses incurred due the city’s breach in the contract.

“Despite these past demands for enforcement, it has now become apparent that the city is either unwilling or unable to timely comply with its obligation to exclude all other waste haulers from the solid waste and recyclables markets in Waxahachie. The city’s past efforts to stop the numerous violations of Best Disposal’s exclusive franchise do not satisfy the city’s obligations under the franchise agreement since the violations have continued over an extended period. … Accordingly, unless an amendment to the franchise agreement is executed, IESI must terminate the franchise agreement as of Oct. 1, 2007, and take the legal action it deems appropriate to recover the losses … An amendment is needed to avoid this course of action to address the problems experienced in the past by changing the current pricing structure and reducing the grant to IESI and Best Disposal to only include the exclusive right to provide the collection and disposal of all residential and commercial solid waste and recyclable materials in Waxahachie. … The change in rates would be necessary to compensate for this narrowing of Best Disposal’s exclusive franchise, ” the letter states.

In a follow up letter written Sept. 6, the law firm stipulated IESI and Best Disposal “has no intention to terminate the current franchise agreement based on the breaches by the city discussed in our past correspondence so long as a satisfactory amendment or other resolution can be reached by and between the city and IESI.”

The letter stated that, on Sept. 5, Bob Kneis with IESI provided the city with a revised rate structure that would need to be adopted along with an amendment to the franchise agreement that removes the roll off collection from the exclusive franchise rights.

That increase in rates for the city and its customers was not made available to the Daily Light.

“Furthermore,” the Sept. 6 letter states, “IESI has considered the city’s suggestion to simply remove commercial and industrial recycling from the exclusive franchise to resolve the enforcement issues. After review, we do not believe this would provide a viable solution of the widespread violations of IESI’s exclusive right to roll off container collection by unlicensed haulers. The enforcement issues IESI has identified and documented to the city include both solid waste and recycling.”

IESI provided the Daily Light with three photographs of unauthorized roll off containers, all three date-stamped Jan. 3, 2007.

Stevens identified the photographs as the cases that were brought to his attention earlier this year and said in all three cases the haulers complied with the city’s order to remove the containers.

The Sept. 6 letter concluded with a reference to IESI’s new proposed price sheet, which had been revised from the Sept. 5 demands, noting the revised pricing reduces the previous increase in residential charges and increases the rates for commercial customers.

Prior to Monday’s open meeting, the council met in executive session to discuss pending litigation and termination of contract with the IESI.

When the council reconvened in open session, Wilkinson informed the members of the public the city has received correspondence from IESI and a motion was made to instruct the city attorney and special counsel to provide a written response to that correspondence.

Without further discussion due to pending litigation, the motion was seconded by Gallo and was passed by unanimous vote of the council.

What’s next?

With negotiations ongoing between IESI and the city’s attorneys, Stevens said he was optimistic that a resolution could be worked out prior to IESI’s Oct. 1 deadline.

“The bottom line is we want to get this resolved with no interruption of services to the citizens of Waxahachie,” Stevens said. “We will continue negotiating with IESI to seek an amicable, fair agreement for all parties without the need for litigation.”

E-mail Neal at neal.white@waxahachiedailylight.com