Santa Rosa taps Recology as new garbage hauler

The curbside collection rates that most Santa Rosa residents pay are set to soar nearly 60 percent under a proposed 15-year contract the city has negotiated with the San Francisco-based garbage company buying its current hauler, The Ratto Group.

The city this week released details of the agreement it has struck with Recology to be the exclusive provider of the garbage, recycling and organic waste pickup services to approximately 55,000 residential and commercial accounts beginning Jan. 1.

If approved by the City Council, the deal is expected to generate $49 million in annual revenues for Recology, or $735 million over the life of the contract. The company would pay the city a 14 percent franchise fee, which would pump $7 million annually into the city’s coffers, or $105 million over the life of the agreement.

The report is the first official confirmation that Recology, one of the largest refuse providers on the West Coast, has survived a competitive and secretive selection process to ink a tentative deal with the city, a fact first reported by The Press Democrat earlier this month.

“It wasn’t a straight line to this point, but we got here,” said Eric Potashner, vice president at Recology. “Santa Rosa is a community that has a strong environmental ethos and I think it will be a good partner.”

City leaders have been saying for years the existing rates charged by The Ratto Group were below market, but just how much rates would rise under a new hauler was anyone’s guess. The staff report, prepared in advance of the Aug. 29 City Council meeting to vote on the deal, offered the public its first glimpse of the magnitude of the rate increases.

“It will be a bit of a shock to our residents because rates have been so low,” said Councilman John Sawyer, who served on the selection panel. “But it kind of goes back to that cliché, you kind of get what you pay for.”

Low rates have long led to big headaches for The Ratto Group, the dominant waste hauler in the county, serving eight of the nine cities plus the unincorporated areas.

The company, founded by Jim Ratto, has been repeatedly criticized for cutting corners in Santa Rosa in ways that resulted in poor customer service, dangerous working conditions for workers, low recycling levels, and an aging fleet of trucks that didn’t live up to its contract with the city.

It didn’t help that its recycling centers on Standish Avenue were ordered shut down by regulators. The company just obtained its long-sought solid waste permit from Sonoma County following an estimated $8 million in upgrades.

A typical residential customer in Santa Rosa with a 32-gallon garbage container, the most popular size, is currently paying $16.97 per month for garbage, recycling and yard waste pickup. Under Recology, that cost would rise to $26.85, an increase of 58 percent. The 20-gallon, 64-gallon, and 96-gallon are all slated to go up by similar amounts.

The city stressed that even with the increases, Santa Rosa’s rates would be 8 percent to 17 percent below the regional average. It estimated that under Ratto, rates were 42 to 48 percent below average.

Far sharper increases are in store for business customers, however.

Under the agreement, commercial cart rates would go from $33.05 for a 64-gallon container to $83.29, a 152 percent increase. Rates for the 96-gallon size would soar even higher, going from $38.81 to $125.07, or a 223 percent increase.

The commercial rates would increase more sharply than residential rates for several reasons, Potashner said.

One is that commercial operations are generally considered a “dirty waste stream” that will require additional work by the company’s education staff to address, he said. The other is that commercial accounts, which often include oversized containers, take special vehicles and effort to service, Potashner said.

The higher rates would result in a number of service improvements, he said. The approximately 400 workers at The Ratto Group, who earlier this year joined the Teamsters, would receive higher wages and better benefits.

“I believe Recology is the right choice for Sonoma County all the way around,” said Mike Yates, president of Teamsters Local 665.

The additional money would also fund a new fleet of trucks, new curbside containers, and additional upgrades to the Standish Avenue facility, he said. The company estimates it will spend $28 million on new trucks and containers, said Gloria Hurtado, deputy city manager. The higher rates would also fund a far more robust education program, with “zero-waste specialists,” who will help commercial and residential customers do a better job of recycling, Potashner said.

“At the end of the day, you can’t get to the recycle rates that Santa Rosa wants to get to just based on technology. There is a human element to this,” he said.

The contract, which has yet to be released by the city, calls for the company to increase its recycling rates from the current 36 percent to 60 percent by 2029, according to the report.

By comparison, San Francisco has an 80 percent diversion rate. Los Angeles has a goal to increase diversion to 90 percent by 2025.

That education component is going to play a big role in whether the company will succeed in Santa Rosa, Sawyer said.

Education was one of The Ratto Group’s shortcomings, leaving residents in the dark about just what is recyclable and what is not. Sawyer said to this day he breaks his pizza boxes into two, putting the clean piece in the recycling and the greasy one in the garbage, but it seems ridiculous to him and he has no idea if that’s the right thing, he said.

“The education piece is absolutely elemental to the success of this company and to the level of satisfaction of their customers in this city,” Sawyer said.

Recology was actually not the city’s first choice.

The city initially narrowed the four responsive bidders down to two finalists: GreenWaste Recovery of San Jose and Waste Management of Houston.

But GreenWaste, which appeared to have the lowest bid, failed to include the 14 percent franchise fee to the city in its rates. The company asked to resubmit its bid, but the city rejected the request.

The city then turned to Waste Management, the largest garbage company in the nation. Members of the selection panel even toured the company’s facilities in the Sacramento area. But the company stunned the city when it told them it couldn’t get the trucks it needed by Jan. 1.

“My mouth dropped. I was speechless,” Sawyer recalled when he heard that explanation.

That’s when the city pulled Recology back into the conversation, and the company assured the city it could get the trucks it needed by Jan. 1, Hurtado said

Waste Management tried to return to the table, but wanted to renegotiate rates, a request the city rejected.

You can reach Staff Writer Kevin McCallum at 707-521-5207 or kevin.mccallum@pressdemocrat.com. On Twitter @srcitybeat.