News - May 19, 2010

After losing contract, garbage company hiked pay 17% to 19%

by Sean Howell

The company that collects garbage for Menlo Park and Atherton granted its employees pay raises of 17 to 19 percent over the span of a five-year contract, signed in December 2008 — shortly after the company learned that its own pact with those and 10 other jurisdictions would not be renewed.

When Recology Waste Zero (formerly called Norcal) takes over the reigns from Allied Waste (now Republic Services) in 2011, it will likely be forced to honor that contract for nearly three more years, common practice when a new company takes over.

When Menlo Park Councilman Heyward Robinson looked into the issue, he found that there are no checks in the waste collector's contract with the regional waste agency to keep labor costs down. Those costs are simply passed through to the member jurisdictions, with the waste company's profit — set at a percentage of total costs — also rising.

"When I looked at it, I was just blown away," Mr. Robinson said. "The way it looks to me, there's no incentive to control these labor costs. ... Where are the levers of power here, where's the accountability?"

Kevin McCarthy, director of the regional agency that oversees garbage collection and processing (the South Bayside Waste Management Authority), acknowledged that Mr. Robinson "raises a good point," but noted that various market pressures keep labor costs down.

He added that the lack of a check on labor costs is "an artifact of a type of contract that's no longer common in industry," noting that wages will be adjusted to the consumer price index under the next contract.

"On the face of it, it doesn't seem unreasonable," Mr. McCarthy said of the contract. "Certainly, I think we would have liked to have seen a shorter term. To say it's awkward to have a lame-duck service provider negotiating future agreements ... well, it's a very awkward situation."

The regional waste agency's divorce from Allied was not a happy one. Allied alleged that the bidding process had been corrupted, hiring a PR firm to help it make that point, and eventually inspiring an investigation of the matter by the San Mateo County Civil Grand Jury.

Evan Boyd, general manager of Allied Waste, said the company did the best it could to reach a fair agreement with the Teamsters union. He maintained that five-year contracts are standard in the waste-collection industry, and that the Teamsters would not have accepted a shorter term.

Asked why the company offered substantial raises while the country was sinking deeper into an economic recession, Mr. Boyd noted that negotiations had begun before the precipitous stock market slide in the fall of 2008, and said that the union has substantial leverage.

He also noted that the increased cost of labor is only one of many reasons that Menlo Park and Atherton residents have seen steep garbage rate increase in recent years; Menlo Park's rates have increased by more than 70 percent in the last two years. Higher fuel costs and landfill charges have also been factors, and Menlo Park has had to work to pay off a debt to the waste company.

To Mr. Robinson, the situation indicates a need for a policy advisory board on the waste agency, similar to other regional committees and agencies.

"So many of these regional labor contracts get approved with very little public scrutiny," he said. "Regional agencies just don't have the same (burden) of expectation" that cities have.

The contract calls for a $5.75-an-hour across-the-board pay increase, bringing salaries to a range of $37.30 to $39.96 per hour.

"Are these folks paid well for what they do? They certainly are," Mr. McCarthy said. "On the other side of it, it's a tough job to be out there every day on the street, it's a job that most people don't want to do. ... Allied understands they're in an awkward position, and I don't think they have any incentive to provide overly generous terms."


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