WM CEO Spoke the Truth in May 2013-- WM premium Will Cost Delray Trash Customers $9,273,164!Commissioners and Concerned Delray Citizens:
Below is my 5/17/13 email previously sent to you "WM trashes Delray
Politicians" and the press release which is its source.
WM's CEO has stayed true to his words. He warned that municipal pricing
was becoming too competitive and WM wouldn't chase the business by
lowering its rates.
Well, the Delray bid results are in and according the City's Consultant
(Mr. Redman), WM lowered its total trash costs to City customers
(residential, commercial, and governmental) from $9,761,574 to
$9,635,937--- a paltry $125,637 or 1.3% REDUCTION.
Two other bidders were substantially lower with the lowest bid being
Southern Waste Systems (SWA) at $8,464,454, or $1,297,120 (13.3%) LOWER
vs. WM's $125,637 (1.3%)!
The first year savings for Delray with SWS compared to WM is $1,173,483
annually--over 10 times GREATER!
On 12/18/14, 4 staff members on a 5 person Trash Bid Evaluation
Committee inexplicably recommended that the City continue its trash
service with WM. The WM "premium" charge vs. SWS will be $8.7M over the
seven year contract term assuming a 2% annual rate increase. With the
City's Franchise Fee Tax (5% Residential and 10% Commercial) added, the
WM "premium" will cost Delray trash customers $9,273,164!
Fortunately, the Commission is not bound by the Committee's
recommendation. Stay tuned!
P.S.-- No City staff analysis yet justifying the questionable $177K
shortfall in annual WM Franchise Fees payments. Hmmn!
----- Forwarded Message -----
From: Kenneth MacNamee <kjmacnamee@yahoo.com>
To: "Glickstein@mydelraybeach.com" <Glickstein@mydelraybeach.com>; Adam
Frankel <frankel@mydelraybeach.com>; Angeleta Gray
<graya@mydelraybeach.com>; "aljacquet4@gmail.com"
<aljacquet4@gmail.com>; shelly petrolia <shellypetrolia@aol.com>
Cc: "chapman@mydelraybeach.com" <chapman@mydelraybeach.com>; maria
herrera <meherrera@sun-sentinel.com>; "margie.plunkett@hotmail.com"
<margie.plunkett@hotmail.com>; "rschultz@pbpost.com"
<rschultz@pbpost.com>; "jreplogle@sbgtv.com" <jreplogle@sbgtv.com>
Sent: Friday, May 17, 2013 6:37 AM
Subject: Waste Management (WM) "trashes" Delray (Politicians)
City Commission Members and Concerned Delray Citizens:
The below 5/15/13 attached article quotes WM's CEO who unintentionally
insults ("trashes") the Delray politicians ( former Mayor McDuffie,
current Commissioners Frankel and Gray) who extended the $65M WM
contract for 8 years without a competitive bid on August 21, 2012. But,
make no mistake, he made them look foolish now!
As a former CPA and CFO, I will translate the WM CEO's "finance speak"
into layman terms of what is REALLY being said.
In discussing the recent WM earnings results, the CEO states in the 3rd
paragraph, "We've seen deterioration in municipal bid pricing throughout
the United States." In other words, cities are getting rate reductions
nationwide because they are bidding contracts! In February 2013, Palm
Beach County announced it obtained a 23% rate reduction because it
competitively bid its trash rates.
Unfortunately for Delray trash customers, we will continue to get our
annual 2-3% increases because McDuffie, Frankel, and Gray extended
Delray's $65M WM contract for 8 years without competitive bids (please
note that then and current Commissioner Jacquet vehemently opposed the
extension). Using the County trash rates obtained in February 2013,
Delray trash customers will overpay $12.5M over the next 8 years!
The CEO further states, "...our residential line is very capital
intensive and generally lower margin." Subtly, this means WM has high
operating costs and overhead (tickets to ball games, golf outings,
fishing excursions, tables at black tie events, etc., I guess can add
up) or it wants to maintain its (fat?) profit margin.
The CEO concludes on the topic by stating, "We won't bid on new
contracts that do not meet our return requirements." (McDuffie, Frankel,
and Gray eliminated that problem for WM, at least in Delray!) "We simply
will not chase revenue that does meet our return requirements and we
will not bid accordingly."
The last sentence requires a detailed translation and smacks of
arrogance. It means WM will not address its high operating cost
structure nor reduce its profit margin expectations. He is warning that
WM cannot meet the competition. Any sensible CEO would have stated, "We
have to get leaner and more efficient to effectively compete and better
serve our customer needs."
Delray voters expressed their disgust with the No Bid extension when
they elected new Mayor Glickstein and new Commissioner Petrolia in
March. Both campaigns touted the WM No Bid travesty. They, along with
Commissioner Jacquet, have just initiated a review of the No Bid
extension to determine whether it violated the City's Procurement
Ordinance to obtain competitive bids (See the Sun Sentinel Article on
5/16/13 pg. B-1 by Maria Herrera). The OIG has been on record since
March, 2012 that the City had to bid the contract but City Attorney
Shutt ignored the OIG's warning.
Stay tuned! I believe Delray trash customers still have a chance of not
paying WM's $12.5M "premium" and maybe giving its CEO some more to moan
about. As always, please feel free to forward this email to Other
Concerned Delray Citizens.
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