North Bay Corp. garbage hauler to pay $2 million in fines to Santa Rosa

Santa Rosa’s garbage hauler, which is being sold to a larger company, has agreed to pay the city $2 million to settle a variety of alleged contract violations including use of old garbage trucks, failing to register street sweepers and maintaining a record of poor customer service.

The city’s settlement with North Bay Corp. comes just two weeks after its owner, James Ratto, announced he planned to sell his solid waste empire - including garbage and recycling pickup in eight of Sonoma County’s nine cities and the unincorporated county - to San Francisco-based Recology.

The $2 million is just a fraction of the nearly $18 million in fines the city has been hanging over the company’s head for months.

The city agreed to the lower figure because it wants to get on with the process of selecting a new hauler while also ensuring that North Bay Corp. fulfills its obligations to the city and its customers through the remaining 10 months of its contract, Deputy City Manager Gloria Hurtado said.

North Bay, also known by the name of its umbrella corporation, The Ratto Group, raised legal objections to many of the findings of a scathing 2016 audit, posing the prospect of extended litigation, Hurtado said.

“There was no guarantee that we would get any of those assessments, and the biggest part of those assessments was definitely in dispute,” Hurtado said.

The company paid the city $750,000 on Monday and will pay the rest of the sum in two installments plus interest in May and August, Hurtado said.

The company did not admit any wrongdoing in the settlement.

“We’re pleased to have the matter resolved,” North Bay spokesman Eric Koenigshofer said.

Key to the settlement was the provision related to additional fines over its aging fleet of trucks. The steepest fines of the city’s proposed fines related to the 27 trucks, most of which the city claimed were out of compliance, resulting in thousands of dollars per day in fines.

A provision in the contract calls for North Bay’s trucks to be rebuilt after five years “as needed” and for no trucks to be over 10 years old. Most of the trucks are over five years old, but the city didn’t have any proof they had ever been rebuilt, Hurtado said. Some are over 10 years old, she said.

The question came down to the interpretation of the “as needed” clause, she said.

The settlement waives any future fines related to the fleet, and does not require the company to buy any new ones, which Hurtado said was unrealistic given the short time remaining on the contract.

The settlement also waives any additional fines for the company’s alleged failure to abide by the contract terms over alternative fuels, Hurtado said.

The contract requires the company to get approval from the city for any alternative fuels it plans to use, but Hurtado said she can find no evidence the company ever sought or received such approval. There is also a requirement the company use re-refined motor oil, but it has not done so, Hurtado said.

Koenigshofer said the company uses clean diesel, but he declined to say whether that fails to comply the contract.

The city had previously pegged the potential fines facing the company at around $14 million, representing most of the contract violations stemming from the audit. But in December, one of the company’s street sweepers was pulled over for not having proper title and registration, Hurtado said.

The vehicle was impounded, and the city learned that the company had never registered the four street sweepers it acquired from the city in 2010, despite specific contract language requiring it to do so, Hurtado said. Unlike some of the other audit findings, that was irrefutable, Hurtado said.

So the city proposed an additional $3.4 million in fines, bringing the total before the settlement to nearly $18 million.

It’s not the first time the company was forced to pay penalties to the city.

Following an audit of the years 2005 through 2007, the city required the company to purchase a new fleet of trucks at a cost of about $7 million and to pay ?$1.2 million in fines stemming largely from questions raised about its recycling operations on Standish Road. That property and its operations have been subject to a cease-and-desist order for more than a year, and the county has fined the company $575,600 as of December for failing to have the proper permits. Estimates for upgrading the facilities there need have exceeded $7 million.

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