An investigation by Hews Media Group-Community News related to the lucrative Artesia trash hauling contract, set to be awarded to CR&R during next Monday’s special City Council Meeting, has uncovered several serious concerns in the negotiation and selection process of the contract.
Furthering the lack of transparency in the award process, the negotiations were reportedly handled exclusively by Artesia City Manager William Rawlings.
All City Council members, along with Mr. Rawlings, did not respond to repeated questions about the process.
Normally, a consulting firm is hired to study the bids, generate a report, and present their findings to the City Council and residents for debate and approval, ensuring a transparent process.
Lastly, and most egregiously, two reliable sources related to the negotiations have told us that the $350,000 “negotiation fee” that is being paid by CR&R to the city is going as a “bonus” to the city and City Manager Rawlings for negotiating the contract.
Again all City Council members, along with Rawlings, also did not respond emails related to the question of the bonus.
The first concern is the huge fees paid by CR&R to become the exclusive trash hauler for the City, along with the length of the contract, which is 15 years.
The contract includes a clause where CR&R will initially pay $2 million as a “franchise fee,” along with “a $510,000 fee, paid annually in quarterly installments.”
CR&R is also paying $350,000 to “reimburse the city for expenses incurred in the negotiation and award of the contract” and “$100,000 in consideration of the right to negotiate the contract.”
It is that $350,000 that two sources told us was going to the city and City Manager Rawlings as a bonus for exclusively negotiating the contract, and the $100,000 is going straight into the city’s coffers.
One Artesia resident commented, “Isn’t that a slight conflict of interest between CR&R and the City Manager?”
Mr. Rawlings was, according to sources, the exclusive negotiator of the contract. No one other than city staff was involved.
Other fees paid are an additional annual $50,000 in “administrative fees” and $60,000 for “contract reviews.”
CR&R cited “other city contracts they have that will generate economies of scale and is reflective of the business judgment of CR&R” as the reason they can pay such a large fee.
Experts told us say that there is no way CR&R can make money on this contract, and here is why:
The projected revenue in Artesia is just over $2 million per year. The onetime and ongoing fees over the life of the contract amount to $10,850,000. Amortizing that number over 15 years equates to CR&R paying over $737,000 each year, which amounts to a 36 percent franchise fee, unheard of in the trash hauling business.
CR&R is cashing in on the up-front fees it is paying. The contract term calls for an initial seven years, then 5½ years after that, provided CR&R has “lived up to their promises,” and a 2 ½-year extension after that at the “sole discretion of the City Council.”
Mr. Hews may be contacted at loscerritosnews.net
