OK, technically it isn’t a guest blog, but several readers have forwarded us an e-mail that was sent out and we thought we’d share it with you.  Enjoy!

——-Original Message——-
From: Gonzales, Ron
Sent: Tuesday, June 28, 2005 6:07 PM
Subject: Update on Norcal Investigation

Dear Friend,

This afternoon the San Jose City Council unanimously approved my recommendation to have an independent investigator review the allegations made in the recent report of the Santa Clara County Civil Grand Jury regarding the Norcal garbage contract with the city.

Although I am disappointed by the quality of work done by the Grand Jury, it is important that we get all the facts out by an objective, professional, and independent investigation as quickly and as thoroughly as possible to answer the questions raised by the grand jury, the public, and the Council.

This issue has been covered extensively in the media, and last week the Mercury News published a “Q&A” column about the report of the Santa Clara County Civil Grand Jury that was incomplete and misleading.  To help clarify the matter, I have annotated the newspaper’s explanations with additional comments. The original Merc material is in italics, and my comments follow.

I am confident that the City’s response to the Grand Jury and the independent investigation now under way will help our community understand the issues and confirm that the City Council was working openly for the best interests of our residents and businesses.

Thank you for taking the time to read my side.

Regards, Ron

(June 18)
A report from the Santa Clara County civil grand jury rattled City Hall on Monday by accusing Mayor Ron Gonzales of mishandling an $11.25 million payment to Norcal Waste Systems, one of the city’s garbage haulers. But the specifics of the accusation are complicated. Here’s a primer:

Q: What’s the dispute?

A: The grand jury found that Gonzales and his top budget aide, Joe Guerra, had secretly brokered a deal in 2000 promising to cover higher labor costs for the city’s garbage hauler. The jurors concluded that the council didn’t know that when they approved Norcal as a vendor.

RG:  This is untrue.  First, the City Council knew full well there had been previous discussions before it approved the contract amendment, and this fact was disclosed to them.  Second, neither Joe Guerra nor I ever promised to “cover higher labor costs,” since that is a promise we could never make without Council approval. We only committed that I would recommend that the Council review and consider an amendment to the contract to cover higher labor costs when they were known.

Q: What’s the backstory?

A: Hoping to improve service and save money, the city in 2000 was rebidding its contracts with waste hauling firms. Norcal was the low bidder for a contract covering half the city. Its recycling subcontractor, California Waste Solutions, hoped to save on labor costs. CWS planned to pay its workers lower wages under a Longshoremen’s union contract rather than the higher wages of the Teamsters. The Teamsters had previously represented recycling workers.

RG:  In 2000 the City Council unanimously required that the new vendors to have a “worker retention policy” to ensure that the people already collecting and sorting our garbage would be given the opportunity to work for the new vendor.  The Council also insisted on a “labor peace” provision in the contract so that work stoppages would not occur.  CWS’ plan would have meant that workers would have to take a pay cut and be forced to join a new union. That’s not worker retention AND labor peace.

Q: What was the problem?

A: CWS underestimated the political power of the Teamsters. The Teamsters’ leader, Bobby Morales, argued that the workers should be paid the higher, or “prevailing’’ wage. (The Teamsters’ workers then were paid $10.85 per hour with good health benefits; the Longshoremen, $7, with skimpy benefits). The mayor knew about this problem before the council approved Norcal as a vendor.

RG:  Only one day before the Council approved the city staff’s recommended vendor, I learned that there was a dispute between the Longshoremen and the Teamsters about who would represent the garbage sorters. We had no idea at that time what the cost of that difference would be. In fact, it would have been impossible to calculate the difference at that point as labor negotiations between CWS and the Teamsters did not even begin for some time. When I met with Norcal on October 6, 2000, I did not know about this issue and it was not discussed.

Q: Why did the mayor get involved in a labor dispute?

A: He has said he wanted to avoid a garbage strike, which can deeply injure any politician. The grand jury, however, found there was “little likelihood’’ of such a strike.

RG:  No mayor and no city council in any community ever want a garbage strike. That’s why we insisted on fair competitive wages and labor peace
in the contract.  A garbage strike can mean piles of trash left on the street that create unsanitary and ugly conditions that frustrate residents and put them at risk.  And a strike actually did occur on February 19, 2003.

Fortunately it was only a brief one-day action because we asked all parties to get back to discussions to resolve the problem and avoid a prolonged strike.

Q: What did Gonzales do?

A: The mayor called a meeting with Norcal and CWS representatives on Oct. 6, 2000, four days before the council approved Norcal as a vendor. According to participants in that meeting, Gonzales said he wanted the Teamsters to represent the CWS workers. And he pledged that he would take steps to see that San Jose covered the extra cost, estimated at $2 million a year to start.

RG:  I did not call for this meeting - it was requested by Norcal as a courtesy meeting. Norcal was doing the same with other councilmembers at that time. This 30-minute meeting was on the Friday before the Council meeting, and it was the one and only time I met with Norcal. We have no record of CWS being present at this meeting, and neither Joe Guerra nor I remember them being there. At this session I told Norcal that I wanted the company to provide excellent service to the people of San Jose and to work hard to ensure labor peace. There was no discussion of the wage differential at this meeting.

Q: What’s the mayor’s version of that meeting?

A: Gonzales has denied making promises or expressing a preference for one union. He says he didn’t learn of the extra labor costs until 2003. But his credibility was damaged when he denied having the meeting in his first interview with the grand jury.

RG:  I never denied meeting with Norcal. The grand jury asked me only if I participated in any negotiations with the company, and I told them I didn’t. The grand jury learned about the courtesy meeting when I provided them copies of my calendar that showed the meeting.

Q: Why didn’t the mayor tell the council of the deal before they approved Norcal as a vendor?

A: A good question. The council probably would have approved the deal in 2000 even with the extra $11.25 million. Gonzales said he didn’t tell the council because the additional costs were “speculation.’’ His critics at City Hall say it’s part of the closed-door style by Gonzales and Guerra.

RG:  Again, there was no deal to tell them about. Remember, the Teamsters and CWS hadn’t even begun negotiations and there could be no estimate of potential costs until labor issues were resolved among the unions, CWS, and Norcal.  The City’s agreement was with Norcal, not CWS.

Q: How did the deal become public?

A: In April, 2004, after a few years of no payments, Norcal sent a request for the $11.25 million to the city Department of Environmental Services, which rejected it. The mayor’s office finally put the matter on the council agenda in September 2004.

RG:  I had told Norcal that I would bring the matter to the City Council for its consideration, and that’s what I did. There was no agreement in 2000, and it was not until several years later that the additional costs became known to the City.

Q: Why did the city council approve the $11.25 million payment to Norcal in December if it was kept in the dark about the original deal?

A: A couple of reasons: First, a majority of the pro-labor council is sympathetic to arguments that a recycling center should pay the higher Teamsters’ wages. Second, at least some members felt they should back a deal already struck by the mayor and Guerra.

RG:  This is insulting to councilmembers.  The City Council was fully aware of all factors in the amendment.  There was no prior “deal.” The Council approved the contract amendment because it achieved the original goals of ensuring labor peace AND worker retention, it paid a decent wage to the people who sort through our garbage by hand, and it was still cheaper than the prior garbage company’s contract.  It was openly done for the benefit of the community, not because of alleged labor sympathies.

The motion to approve the amended contract by the Council adopted stated the following reasons for approval:

*    “First, settling the labor issues and establishing a better wage for the sorters at the recycling facility is beneficial to the effective delivery of services to San Jose residents.

*    “Second, we have successfully prevented any work stoppage by avoiding a conflict between Teamsters and ILWU.

*    “Third, as mentioned above, the overall cost of the proposed amended agreement would remain below the proposed costs of GreenTeam and Waste
Management for the same services.

Q: Bottom line: Did this deal raise my garbage bill?

A: It’s hard to say definitively. But the answer is essentially “yes.’’ The grand jury report says Guerra calculated at one point that it would take a 95-cent-per-bill increase in rates to cover the payment to Norcal. Although San Jose residents were originally promised there would be no rate raises until 2005-06, there have been three since the contract was signed—a 3 percent hike in 2002-03, a 9 percent increase in 2003-04 and another 9 percent raise in 2004-05. However, the Norcal payment is only part of those boosts, which covered costs like a new data management system and cost-of-living adjustments.

RG:  Actually, San Jose garbage rates continue to be lower than average compared to other Bay Area cities, and the lower costs of the new garbage contracts have helped keep rates from becoming higher than they otherwise would have been.  This was one of our main goals in the first place. Garbage rates are calculated every year based on many factors, including the need to maintain adequate reserves, increases in regular operating costs, and improvements in support systems and services.  Most of the added labor costs will occur in the future, and thus will become a factor in future rate calculations.

Q: Was the original Norcal contract still worth it?

A: There’s a good argument it was, though estimates of the savings vary. The grand jury report says that even after the extra payment to Norcal, the mayor’s office estimated that the contract was $2 million cheaper a year than a competing bid from Waste Management would have been. Vice Mayor Cindy Chavez has estimated the total savings to ratepayers at $50 million over the life of the contract, which can last up to 11 years. Chavez said Friday the figure was based on a 2000 city auditor’s report she requested.

RG:  Even with this contract amendment, the recycling services provided by CWS and Norcal are dramatically less expensive than their rivals. Following the amendment, the cost per household for Norcal/CWS recycling is $1.39 per month.  GreenTeam, which was the second lowest bidder, costs $5.27 per household for recycling services.

end