Publication Date: Friday Nov 20, 1998

CITY COUNCIL: City bows to sale of PASCO

The Palo Alto City Council unanimously decided Monday night that it had no choice but to accept the transfer of ownership of Palo Alto Sanitation Co., the city's garbage collector, to Houston-based Waste Management Inc., the world's largest trash hauling company. Waste Management is the name adopted by USA Waste Inc. after it acquired the larger company in March.

The city's decision was based on confidential advice about its legal rights that council members heard in a closed session earlier this month with City Attorney Ariel Calonne.

According to Calonne, the council has no legal obligation or authority to approve or reject the purchase of PASCO shares.

Several residents opposed to the transfer urged the council to take whatever steps necessary to maintain local ownership of the company that provides garbage collection services to the city.

"I urge you to retain control of your trash collection the same way Palo Alto has fought to control other essential services and utilities, such as gas and electricity," said Donna Cabanne, representing the Tri-Valley Sierra Club. "Wouldn't it be in Palo Alto's best interests to retain ownership and thereby have greater control of the waste stream and future profits?" she asked.

Cabanne and others urged the council to seek additional legal opinions and to explore other options, such as whether the city could buy out PASCO owner Paul Madsen's stock and contract.

The Sierra Club and two other environmental groups are suing Waste Management in connection with the expansion of its facilities elsewhere.

USA Waste bought Waste Management in March in a deal valued at over $14.8 billion, making it the largest solid-waste collection corporation in the country. Waste Management's tenure in other cities has been marked by controversy, several lawsuits over landfills and the indictment in October of the head of its Northern California operations on charges related to stock manipulation, Cabanne told the council.

Because PASCO began talking with USA Waste before it bought Waste Management and changed its name, the two names often have been used interchangeably.

PASCO's general manager, Richard Buchner, spoke in favor of Waste Management's pending takeover of the city's garbage contract, saying he wanted to counter citizen fears regarding the effects the transfer might have on customer service. Buchner told the council he expects to stay in his current role to oversee day-to-day operations and management after the transfer of ownership.

"USA Waste has assured me that I will run the operations of PASCO with complete autonomy," said Buchner. "They share the same values as Madsen." If a city doesn't request changes, there won't be any changes under the new owners, he said.

The city of Palo Alto received a letter on Aug. 19 from Madsen notifying it that he had entered into an agreement to sell his stock. PASCO employs 60 people and generates revenue of nearly $8 million a year. Waste Management says there will be no changes in personnel, compensation or operations, and the company pledges that service standards will remain high.

In documents presented to the council, Waste Management maintained that it is operating under USA Waste's decentralized business model and tailors its service to meet the needs of individual communities. The company enclosed testimonials on behalf of USA Waste and Waste Management Inc. from more than a dozen cities, including San Leandro, Santa Ana and Oceanside.

Acting on Calonne's advice, the council directed staff to approve the assignment of the lease of the 2000 Geng Road waste disposal facility to the new owners of PASCO, without formally approving the company's acquisition.

Councilman Gary Fazzino, who made the motion to approve the transfer, said he felt compelled not to object to the transfer of ownership.

Palo Alto is unique, Fazzino said, because the city has owned its own utilities since 1905. However, he noted, "Madsen is free to assign shares of stocks to whoever he chooses. . . . We're in no position to do anything but allow the sale to go through." Fazzino added that he regretted Madsen was getting out of the business.

The city does have an opportunity to ensure continued quality service during pending negotiations with Waste Management over a forthcoming memorandum of understanding. PASCO's contract is in effect until June 30, 2004, at which time the city could put the service out to bid or create its own municipal garbage company.

City Manager June Fleming promised she would personally lead the city's negotiating team in its discussions with Waste Management to make certain the new owners maintain the excellent service and focus on recycling PASCO has provided.

Fleming is scheduled to report back to the council with a draft memorandum of understanding between the city and Waste Management by March 1.

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