Junk Bond

For decades Minneapolis has paid the same company to haul trash. Is it a good deal? No one has asked.

When it comes to garbage in the city of Minneapolis, there appears to be only one undisputed truth: If you put it on the curb, someone will come and take it away. Tree branches, tires, old dishwashers, disintegrating carpet--some diligent trash crew will whisk it away and get it out of your sight.

Considerably more contentious is the question of exactly who should get to pick up that household waste. For the past three decades, Minneapolis has had the same system for garbage pickup. The city is split into halves, one served by municipal employees, the other by private haulers. Today the geographic split forms two interlocking L-shapes: The southern and eastern parts of Minneapolis have trash hauled by city crews, while the northern and western areas are served by Minneapolis Refuse, Inc. (MRI), a consortium of some 25 trash haulers, large and small. MRI has had the contract--at $5.5 million a year, it's one of the city's largest--since the system went into effect in 1971. And in all those years, the city council has never entertained other proposals for the service in a competitive bidding process.

Despite pleas from the city's division of Solid Waste and Recycling, independent trash haulers, and several past and present city council members to make the process more competitive, the city's contract with MRI has skated through official channels for three decades. (State law exempts cities from using a competitive process for certain services, including garbage hauling.) While there appears to have been a reasoned policy for the original contract, no one seems able to offer an explanation for the continued lack of competition, except the obvious one: inertia.

Becca Carr

Although MRI's current contract does not expire until the end of 2002, late last year the haulers' consortium approached the city, asking to increase fees and extend the contract another five years, arguing that rising costs mean the haulers are losing money. As the debate continues, critics worry that, if history is any guide, the city will probably renegotiate MRI's contract without answering what seems like a simple question: Why hasn't this contract ever been put out for competitive proposals?

"I don't know why you wouldn't want to find out what the market has to offer the City of Minneapolis," says Barret Lane, 13th Ward council member, adding that the reasons cited for staying with MRI have been relatively superficial: It's a hassle to ask for proposals; and, if it ain't broke, don't fix it. "No one has offered to me a coherent explanation of why we want to do this."

Before 1971, Minneapolis crews picked up "wet waste," such as rotting food. Burnable waste was disposed of in furnaces, and the rest of the "rubbish," ashes and trash that could neither burn nor rot, was picked up by private haulers. In 1971, when a change in state law banned outdoor burning, Minneapolis moved to a system in which it would oversee citywide hauling of all garbage, wet and dry. But the notion of the city taking over trash collection throughout Minneapolis caused a stir among the private haulers, according to Minneapolis City Engineer David Sonnenberg. Other cities had not opted to organize trash collection; in St. Paul, for example, homeowners must contract with the trash hauler of their choice. "So as not to damage the business community that had been providing this service, the argument was made that the city do half and those companies that had been doing it for years do half," Sonnenberg explains. "It was a policy decision. That relationship has continued over time."

Even in those early days, says Susan Young, the city's director of Solid Waste and Recycling, the city planned to entertain bids for the contract. But then a group of more than 30 haulers formed a coalition and offered to do the work, she says, and it has been that way ever since. If the city were to open garbage service up to competition, Young says, MRI, with its experience in serving the city, would "have a real inside track." The city would not be obligated to take the lowest bid, Young adds; rather it could look at the services offered and the company's experience and choose what seemed like the best package. For that reason she'd like an opportunity to see other proposals--and even have her own department get in on the process. "I think the city can out-compete anyone there," she says. "We have phenomenal folks here and we have a pretty efficient operation."

And it's not necessarily the case any longer that changing the system would be tantamount to shuttering a host of small businesses, she and other critics say. Since those early days, many of the original small haulers have been bought up by larger companies that now make up a big portion of the consortium, they claim. National waste-removal firms, such as Waste Management, Inc. and BFI Systems of North America, participate; in fact, those two companies alone own a third of MRI's shares. (MRI officials declined to comment on the Minneapolis contract for this story.)

Still more frustrating, Young continues, is the timing of the discussion. Since MRI has held the garbage contract, the consortium consistently has asked to renegotiate its five-year contracts in their third or fourth years. "The last three or four times it's been just before the [Minneapolis electoral] endorsing conventions that MRI comes in with the request," she says. "I'm sure it's just coincidence, but it just happens that way. It becomes a very political decision."

That was all too true in 1997, the last time the city council debated the issue. Steve Minn, then a council member who pushed to open up the contract to competitive bids, recalls a bitter debate. In the end, Minn's plan failed on a 7-6 vote and the city renegotiated MRI's contract. But, as Minn recalls it, that was supposed to be the last time the city re-inked the deal without inviting proposals from other haulers.

"We were within a mouse's hair of taking competitive bids. And the next time around it was supposed to be competitive bidding," he says. "It's absolutely criminal that it's never been competitively bid. Once, just once, could we please get a price check?"

Probably not this time around. The decision to renegotiate MRI's contract--though without the consortium's requested retroactive fee hike--passed the city council's Transportation and Public Works Committee on March 8. The Ways and Means/Budget Committee deadlocked 3-3 on March 19 and sent the issue on to the full council. Though Sonnenberg is responsible for providing the trash service, he has asked the council for explicit directions on how to proceed with the contract in order to avoid the heated debate of 1997.

In a December letter to the chairs of the council's Transportation and Ways and Means committees, Sonnenberg asked the council to tell his office how to handle the situation. "If it is the city's policy to use this public/private partnership as a means of competition to potentially leverage down rates for our customers, then the direct way of providing that competition is allowing the private sector to compete," he wrote. "If it is the city council's policy to continue with a public/private partnership that has proven effective in delivering this service, then it would be more appropriate to renegotiate the existing contract."

Now that the transportation committee has moved to reopen negotiations with MRI, Sonnenberg sees it as a "reaffirmation" that the city will stay with MRI and continue on with the service that has been provided for years.

And why not, offers Lisa McDonald, Tenth Ward council member. "The relationship seems to work with MRI. I don't get a lot of complaints about garbage pickup," she says, adding that she'll support the renegotiation unless a problem pops up.

But to other council members, the whole garbage situation leaves too many questions hanging. "The City of Minneapolis is not a charity for anybody, whether it's downtown developers or trash collectors," says Barret Lane. "This is a highly questionable deal. It's not questionable because of what's being asked, but because of what's not being asked, what's not being said, what's not being discussed. It's something that's just being slid through."

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