Audit reveals Santa Rosa trash company missed recycling target

A Santa Rosa–funded audit of the city’s trash hauler North Bay Corporation was released in May and identified significant shortfalls set by the contract the city signed off on in 2003. That contract expires at the end of 2017 and is up for a five-year renewal in July.

The audit, conducted by the R3 Consulting Group, examined every aspect of the agreement and found, among other things, that the company’s trucks were too old; it wasn’t properly replacing trash cans to the curb; and it didn’t hit the trash diversion mark of 45 percent in 2013 and 2014.

The diversion rate refers to the amount of trash that goes into the recycling market instead of the landfill. The audit found that 39 percent of what North Bay Corporation picks up in the streets of Santa Rosa winds up in the recyclables sorting center on Standish Avenue—a figure disputed by North Bay.

North Bay Corporation is one of the garbage-collection companies controlled by the Ratto Group, which has a near monopoly on garbage collection and recycling services in Sonoma County. Through its various companies, it collects the garbage and recyclables in Santa Rosa, Petaluma, Healdsburg, Rohnert Park, Sebastopol, Cotati, Cloverdale, the town of Guerneville, and unincorporated Sonoma County—eight of nine cities in the county, excepting Sonoma. It also has franchise agreements throughout Marin County, and one in Point Arena in Mendocino County.

Ratto has argued that a cratered recycling market has left the company with the difficult task of offloading low-value recyclables, such as plastic bags. City managers and public-works officials around the North Bay had varying responses to the Santa Rosa audit, but all said that their franchise agreements with Ratto firms had been revisited—if not revised—in recent months as the global market for recyclables (and especially low-value recyclables) has dried up.

A survey of four local cities reveals that different cities have different approaches to the recyclables conundrum. For example, Healdsburg’s agreement differs in one key aspect from the Ratto Group contracts in Novato and Sebastopol, in that it doesn’t provide flexibility to the trash hauler if recycling market conditions change, as they have. That also appears to be the case in Santa Rosa, whose franchise agreement is officially between the city and the Ratto Group—Santa Rosa Recycling and Collections (SRRC).

Asked whether there is language in the agreement that provides flexibility if recycling-market conditions change, Deputy City Manager Gloria Hurtado says via email, “A contract change could have been requested by SRRC, and the city would review and make a determination. SRRC did not request any changes to their contract.”

“It’s not an easy question to answer,” says Eric Koenigshofer, an attorney for the Ratto Group. “We’re going to be submitting a response of the audit to the city by [July] 21st, and that would be the starting point for a discussion about what has been so far only in the newspaper, basically. . . . It isn’t just a yes or no answer.”

But it is in Healdsburg. Brent Salmi is the public works director in that city and says that based on the low volume of citizen complaints he gets, “I have no issues with the Ratto Group or the services they are providing.” But the company did go to city leaders last year, looking for an additional rate increase to offset impacts from the changed recyclables market. The city said no.

“We told them that according to the franchise agreement, we don’t have to adjust the rates because you can’t sell the product,” Salmi says. “They ended up having to store an awful lot of the product, but did not pass any of the costs to us.”

Ratto also sought increases in Sonoma County itself, which agreed to a hike last November. Hurtado says the rate increased in Santa Rosa because North Bay Corporation said it met the
45 percent diversion threshold. The franchise agreement contains scheduled rate hikes pegged to performance—but the company did not get an additional hike to make up for its diminished profits in the recyclables market.

In Sebastopol, city manager Larry McLaughlin says the Ratto-owned Redwood Empire Disposal came to the city council last year “and explained changes to their recycling program.” McLaughlin said the city had gotten “numerous complaints that Ratto didn’t want to take all the recyclables,” which he identified as low-value plastic bags and shredded paper.

The Sebastopol council reluctantly but “officially relieved Ratto of some of the recycling agreement,” says McLaughlin.

The audit essentially charges that North Bay Corporation granted the flexibility to itself, without going to Santa Rosa elected officials to ask for relief. According to the R3 audit, “the company does not accept all recyclable materials, including plastic bags and film, as required by the agreement.”

Over the border in Marin County, Novato has a franchise agreement between the Novato Sanitary District and the Ratto-owned Novato Disposal Services. Sandeep Karkal, general manager of the district, says that Novato Disposal Service’s diversion rate is “pretty much consistently over 50 percent,” and that the sanitary district conducts a quarterly review to check the franchise agreement’s requirements against the company’s performance. And, as with Sebastopol, he says that “the contract has some flexibility” based on changing market conditions. “We want to be pragmatic about this,” Karkal says. “If there are market conditions affecting them, we don’t want to unduly punish them.”

Karkal echoes other officials interviewed for this story when he says, “The biggest issue is the diversion issue, and I have to say it’s the whole recycling market. This is not just Sonoma or Marin County; it’s much bigger in terms of the market, which is going through a difficult transition. There is a global move to recycle higher value over lower value things. I sympathize with Santa Rosa and their issues, and I have to say that we are in the same boat.”

The Sebastopol contract, by contrast with the one in Santa Rosa, doesn’t get into the deep-weeds issues, such as open garbage-can lids and the age of the fleet, says McLaughlin.

But everyone is keyed-in on the diversion rate. Santa Rosa councilmember Gary Wysocky says the diversion-rate issue is so critical because of the “avoided costs—we don’t want to have to build another landfill.” The central landfill is on Mecham Road in Petaluma and is operated by Republic Services, which is not a Ratto-controlled company.

As the Ratto Group prepares its response to the audit, it’s worth noting that Santa Rosa may be unique in the county for its somewhat intimately politicized garbage-collection backdrop. A 2010 report in the Press Democrat noted that Ratto’s lobbyist in Santa Rosa, Herb Williams, is also a political consultant in town who ran the campaigns of three Santa Rosa city councilmembers: Jane Bender, Ernesto Olivares and John Sawyer. Olivares is still on the council and Sawyer is now the mayor.

That year, Santa Rosa officials enacted a rule that said lobbyists had to pay a fee and register with the city. City records show that Williams remains a registered lobbyist for North Bay Corporation, which will head to city hall with its response to the R3 audit next month.

The company has already said it would not seek a contract extension beyond 2017, given the increasingly onerous terms of the current franchise agreement. In all likelihood, the job will be put out to bid in 2017, and Santa Rosans can count on one thing when it comes to garbage collection: it ain’t going to get cheaper anytime soon.

Sonoma County Library