San Diego Mayor Jerry Sanders is abandoning a potential sale of the Miramar Landfill – a key piece of his fiscal recovery plan — after three private companies withdrew from the bidding process without making an offer.
Instead the mayor said he will move forward with possibly outsourcing the landfill’s operations through managed competition, which allows private firms to compete against city workers for jobs. That option will likely result in far less taxpayer savings than a sale because the city won’t be able to charge the operator a franchise fee of as much as $10 million annually.
The decision ends a seven-month period in which the three firms – Allied Waste Services, Texas Disposal Systems and Waste Management – researched the landfill and negotiated with city officials over various details. In the end, none were willing to submit a formal offer.
“We still believe that selling the landfill was the best option for the city,” Sanders said in a statement. “At the beginning of this process, there was a lot of interest and enthusiasm. But at the end of the day, all of the bidders preferred to run the landfill instead of buy it.”
San Diego faces a $56.7 million budget deficit for the fiscal year that begins July 1 and leaders are exploring a wide range of options to increase revenue or slash expenses. Soliciting bids to take over operations at Miramar Landfill is one of the most frequently mentioned for saving taxpayer money and city leaders even attached it to a campaign to increase the city’s sales tax, which voters roundly rejected in November.
But the potential sale appears to have been doomed by the landfill’s complicated ownership structure and an unwillingness by the private companies to shoulder the financial risk of unknown environmental liabilities.
The city has operated Miramar Landfill since 1959 when it signed a $500-a-year lease deal with the military, which owns the property. The lease, which extends through 2045, changed several times through the years, notably expanding the site from 450 acres to the existing 1,400-acre plot.
The north and south sections of the landfill have already been filled. The active western portion has collected 39 million tons of trash with room for an additional 19 million tons. At the current pace — 988,000 tons of solid waste and 348,000 tons of greenery added annually — the projected closure date is 2022.
City officials were adamant that whoever took over operations would have to assume the landfill’s liabilities, including any costs associated to its eventual closure.
Bob Gregory, chief executive and principal owner of Texas Disposal Systems, said he was “unable to come to a comfort level” in large part because of the environment liability and questions over what role the military would play.
“It’s a wonderful opportunity. We were very excited about the prospect, still are excited about the prospect if they want to do it under a different set of circumstances,” he said. “It was a business deal that had a great deal of financial risk.”
In a statement, Allied Waste also said it would prefer an operational agreement rather than a purchase. A Waste Management official didn’t return a call for comment.
The goal had been to hand the city’s lease over to a private company that would, in turn, give the city a steep discount on dumping fees and pay the city an annual franchise fee of as much as $10 million. That money could then be spent on public safety, parks and libraries.
That’s not possible today. The landfill’s $37 million budget is fee-based and stands apart from the city’s $1.1 billion operating budget. The law does not allow the city to use the fees except at the landfill.
The separate fund also results in the city, which is prohibited from charging most residents for trash pickup, having to pay dumping fees at Miramar of up to $11 million annually from its operating budget.
Now the city will try the less aggressive route of managed competition, a change viewed by some as an opportunity for the roughly 130 city employees who would have lost their jobs had the landfill been sold. Now they’ll be given a chance to submit their own proposal against private firms for the work.
Joan Raymond, head of the city’s blue-collar union which represents many of those workers, was on vacation and didn’t immediately return a call for comment.
City Council President Tony Young said the mayor has taken a prudent approach with the landfill.
“I think we have to have an understanding of what our assets, especially a big asset like that, is worth,” Young said. “Now we’ve found that there’s not a big market for it for whatever reason. I’m actually really happy that now the employees get a chance to bid on it and the taxpayers will be able to get probably a better price in regards to running it because it’s going to have some competition involved.”
The Mayor’s Office is expected to begin the managed competition process for the landfill in May or June, but final approval may not come until mid-2012.
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Source: Sign On San Diego and WIH Resource Group, Inc. (WIH)
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