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In Fresno, Privatizing Trash Pickup Ignites Controversy

City of Fresno Public Utilities

It is a dirty job, picking up the trash of Fresno’s residents.

But it is also a job that has afforded 58 year old Joe Hill a decent middle income salary. Those at the top of the scale can make $22 an hour.

“I have a good job. I make a decent wage, but I don’t feel I am overpaid. I praise god for the job I have and how much I make. And I know there’s lots of people who make a lot less, but it’s not excessive,” says Hill.

Hill has worked in the city’s solid waste division for ten years. Now he and close to 200 of his colleagues are facing an uncertain future. The city is working to have a private company take over its residential trash pick-up. The company, Mid Valley, who last year won a portion of the contract to take over trash pickup for the city’s commercial clients, has promised workers like Hill a job for at least one year, their salaries slashed by about 24 percent.

“Should I be grateful I still have a job? Yes, but seeing the big disparity in pay, I’ve done the numbers, I’m an intelligent man, I have a college degree. It’s going to be devastating to our family’s budget, I don’t know how we are going to be able to make it financially,” says Hill.

The move to privatize the city’s solid waste division has pitted employee and community groups against city hall and the business community. 

“First of all we believe in outsourcing, we think that the government is there to give some basic services, fire and police,” says Al Smith, president of the Greater Fresno Area Chamber of Commerce. He says it just makes good business sense.

“That which can be done by the private sector, in our opinion, generally is more efficient, more competitive, tends to cost less,” says Smith.

Dee Barnes, president of the Fresno City Employees Association says if you follow that model then the city’s reasoning for handing off its trash to a private company doesn’t fit, and here are the reasons why.

The solid waste division is what is called an enterprise department. “Which means the rates that they charge completely cover all of the costs of providing the service to the citizens,” says Barnes.  That includes equipment, personnel, and money needed to run the department. So there is no cost to the city.

When it comes to being more efficient Barnes says solid waste is a well run department.

“In fact, National Geographic just featured a story about our recycling program. So we have won all kinds of awards, the service provided to citizens is excellent, we have one of the lowest rates in the state,” says Barnes.

The department has built up such a healthy reserve, approximately $16 million, that in 2011 the utility advisory committee recommended the city lower trash rates. The city failed to act on that recommendation. Barnes believes officials took no action because they had plans to privatize all along.

“They are looking to privatize because right now the city cannot use any of the money from the rate payers for anything other than trash. So they can’t use any of that fee, that $25, to pay for police, parks or fire. It can only be used to provide that service,” says Barnes.

Fresno city’s budget problems have been well documented and while the city isn’t facing bankruptcy, city manager Mark Scott says Fresno has a very real cash flow problem, and needs money now to close a $5 million hole in its current budget.  At a recent city council meeting Scott spelled out a bleak scenario.

“This situation, as serious as it is, threatens us, in the sense that we will be in a position unable to make payroll or will be in a position [where] we won’t be able to close our books at the end of this fiscal year, unless we close the fiscal gap in a way our budget envisioned,” said Scott on November 29, 2012.

Turning the city’s residential trash service over to a private company would provide the city with some much needed cash and provide a new source of revenue for the general fund. Money that could be used for police, fire and parks.

Marina Magdeleno, a representative with the union representing trash haulers says that’s the real reason behind the city’s effort to privatize solid waste.

“Now, they are going to franchise solid waste to a private company, they are going to charge the private company a franchise fee, that they in turn put that money into the general fund where they can do whatever they want with it,” says Magdeleno.

Patrick Wiemiller, director of utilities for the city of Fresno says while being able to generate a new revenue stream was an important factor in the city’s efforts to privatize, it was not the only consideration.

“You have to have a decision that’s also based on can you still provide service that’s as good as what you’ve been getting, can you do it at or below the current cost. If you can do all that and still meet your recycling goals and you have the added benefits of providing additional income to the general fund then that would be a great outcome,” says Wiemiller.

Mid Valley, the company the company seeking to take over the city’s residential trash service has not only promised to reduce rates by at least 15 percent, it has worked out a deal with Fresno that will give the city a $1.5 million one-time signing bonus, and approximately $2.5 million annually in franchise fees. With the contract scheduled to take effect in March the city could get some of that money this fiscal year.

And last June, when the city council approved this year’s budget, it counted on receiving one million dollars from this planned privatization to help balance the city’s books. 

“It doesn’t recover the whole budgetary gap but it does help narrow the gap quite a bit,” says Wiemiller.

The fact that the deal with Mid Valley will not generate enough money to close the current budget gap of about $6 million has Fresno county council member Blong Xiong questioning the effort to privatize now.

“To me it doesn’t solve the root of our problem; it takes away a service that we do well,” says Xiong.

Xiong calls it a short term fix for a long term problem and because it involves budget issues, should be part of budget discussions.

“It hasn’t been justified to me why we have to privatize at this point, and why this process is going so quickly. You have two new incoming council members [who are] going to be dealing with this. Privatization is not an emergency. Now we may believe that our financial difficulty is an emergency. I just want to make it clear, we’ve been having these types of budget discussions the last six budgets, in the last three or four years here,” says Xiong.

Wiemiller disagrees, and says turning over trash pick up to a private company will produce long term gains.

“I don’t see this as a short term solution certainly the franchise agreement that’s being purposed here is for a nearly nine year period of time, and in my book I don’t look at that as a short term solution,” says Wiemiller.

Wiemiller says the deal could generate $50 million in franchise fees over ten years, and if Mid Valley raises its rates, as some predict the company will do, that could mean more money for the city.

Fresno will also have access to the $16 million solid waste has in its reserves. Wiemiller explains what will happen to those funds.

“We own a landfill the landfill. The landfill is closed. It’s an EPA clean-up site. And we continue to have expenses for maintaining the landfill and the cleanup of the gasses and the groundwater that are related to that landfill site,” says Wiemiller.

The cost of maintaining the clean-up of the landfill is set at about a $1 million a year, there are some who believe the money should go back to ratepayers.

“You could either use it to buy down rates even more for the ratepayers, or you could do refunds,” says Wiemiller.

Exactly how the money will be used is yet to be seen.  Despite those questions and opposition to the city’s deal with Mid Valley the Fresno City Council is set to finalize its deal with Mid Valley at this week’s council meeting.

“It’s not an easy thing to do to make a decision to let go of operations like this or to separate your colleagues,” says Wiemiller.

Wiemiller says it is part of the economic realities that Fresno and other cities are facing. Over the last few years Fresno has reduced its workforce by close to 1,000 people.  While city officials call it a budgetary decision, employee groups see it another way.

“They don’t believe that the city should be an employer and that’s their motto. And so this is a way to downsize and get rid of it,” says Magdeleno.

Whether that’s been the intent privatizing government services is seen as a way to save money, and in the case of the city of Fresno, a way to generate new revenue. Employees like Joe Hill end up being the casualties.

“You get to a point in your life to where what you’ve done has been so devalued to such a large extent. Whether it’s prideful or not, I would like to think that what I’ve done and the quality of work I’ve offered the city is worth something. And to have it devalued and basically we’re told that you’re really not worth that much, and you’re only a garbage man, that hurts,” says Hill.

Juanita Stevenson has lived and worked in Fresno for the past 24 years. She is perhaps best known to Valley residents as a longtime reporter and news anchor with local television station ABC30, and has also worked at stations KJWL, KYNO and ValleyPBS. She is the recipient of the 2001 Associated Press Award for Best Reporting, and the 1997 Radio & Television News Directors Association Regional Edward R. Murrow award for Best Reporting.