A growing group of people wants Pierce County residents to know there are some trashy deals going on. What looks like — and is certainly being sold as — a simple arrangement between Pierce County and local garbage handler Land Recovery Inc. to manage and dispose of garbage for legions of South Sound residents isn’t that simple, they say. 

Dirty. Incestuous. Lopsided and unfair. These are words those opposed to the new contract use to describe it. 

The blockbuster contract approved unanimously by Pierce County Council last month governs waste handling in the county, outside of Tacoma, for the next 28 years. The binding agreement is promised to net LRI — a company that privately owns the 168-acre landfill in Graham along with the 320-acre site it sits on — a cool $1.7 billion. Thanks to a recent purchase, LRI’s new parent company is Folsom, Calif.-based Waste Connections Inc. — a massive and ever-expanding solid waste services operation that does business in 23 states. 

If that seems like a whole lot of money over an incredibly long period of time, that’s because it is. For reference, the communities of Chehalis and Eatonville recently said no to pitches for multi-decade contracts with LRI, choosing a more common standard length of one to four years. The guaranteed $1.7 billion worth of income for LRI is more than twice what it cost to build the new Tacoma Narrows Bridge. 

According to Graham resident George Wearn, the new contract will result in an unfair and unnecessary government-sanctioned monopoly guaranteeing LRI and Waste Connections tens of millions of dollars in annual revenues for dozens of years into the future. 

Sources close to the deal say the unnatural length of the contract is a concession by the county, granted in exchange for LRI’s cooperation in yet to be finalized waste reduction and recycling goals. The deal also guarantees Pierce County will have a place to dump its trash until 2036. LRI makes most of its money based on the amount of garbage that enters its landfill, and Pierce County’s much talked about waste reduction and recycling goals may result in less trash heading to Graham over the next three decades. But for LRI, less waste means less money. County officials have responded by signing a deal that includes an unprecedented amount of guaranteed profits, for an unprecedented period of time. 

LRI — a small component of Waste Connections’ local empire — makes its money from so-called tipping fees. “Tipping fees” is a nice way of saying dumping fees. Tipping fees charged by LRI in Pierce County are higher than any other county in the state and largely determine rates paid by everyone with a garbage can in a very large service area. Over the long term, says University Place Refuse Service owner Neil Holden, tipping fees would go up significantly under provisions of the new contract. 

The Washington Utilities and Trade Commission, in turn, has ruled that the deal doesn’t appear to unduly burden ratepayers — at least in the short term. County Solid Waste Administrator Steve Wamback says one component of rates — dumping fees — will actually be reduced. Of course, the contract adds additional components that will add to rates beginning in 2009. Wamback also contends that maintaining a dump close to home means less garbage has to be transported elsewhere, which can be more expensive, but isn’t always. 

“A publicly traded private business is not going to invest in capital facilities or rolling stock (railway vehicles) unless they stand a good shot at a return on their investment,” says Wamback.

So why all the fuss?

Pierce County officials would have you believe that groups such as CROWD, or Concerned Citizens on Waste Disposal, are railing against this contract because the county put a landfill in their community back in the mid 1990s. Currently, a great deal of Pierce County’s garbage ends up in the controversial landfill. Thanks to the new 28-year contract, this practice will only continue.

County officials have contended that the people against Pierce County’s new contract with LRI are just hung up on the darn landfill, which buries garbage in the ground near their houses, and over a aquifer that acts as the only source of water for more than 400,000 people in Pierce County.

 

“I don’t blame them,” says Pierce County Councilmember Terry Lee. “I wouldn’t want (the landfill) in my backyard either. They’re worried — somewhat rightfully so — about aquifers and their quality of water. But denying this contract doesn’t remove the landfill.” 

People such as Graham resident Jim Halmo, meanwhile, have been publicly and frequently dismissed as NIMBYs (not in my backyard). NIMBY is a term used by public officials to marginalize people who don’t want to live near a nuclear power plant, or a garbage incinerator, or a landfill, for example. For many people, especially politicians and major corporations, the label is a great excuse to ignore the concerns of said NIMBYs whether those concerns are valid or not. But talking with Halmo, one begins to get the feeling there’s more to his concern than just what is in his backyard. 

“When you look at the contract, you will be hard-pressed to find any savings for the taxpayer,” says Halmo, a former member of the Graham Community Planning Board. “This is about ensuring the profits of LRI and its parent, Waste Connections.”

 

Ah, Waste Connections. We’ll get to that later. 

County officials would say the urgency to get this contract signed now — three years before the current one expires — is about ensuring that Pierce County has enough capacity to dump all of the garbage we’re planning to produce during the next few decades. Landfill space, in Pierce County anyway, is a luxury, and it makes a ton of money for the companies who own it. Garbage is carted by truck and rail to these dumps, which, like it or not, have a tendency to be placed near small towns like Graham. 

 

In Pierce County, the rush to stamp the contract with LRI has been touted as a protective measure, especially by County Executive John Ladenburg and Pierce County Solid Waste Administrator Wamback. If we’re to believe them, Pierce County officials were losing leverage by the second with LRI, and a long-term deal was the best way to handle the county’s long-term waste management needs. 

“Had the county executive and County Council decided the negotiated agreement was not in the county’s best interest, we would have had three years to invest and build a publicly owned and operated system,” says Wamback. “The longer we would have waited to negotiate, the weaker the county’s position would have been.”

“I see this contract as an essential public service, a necessary evil,” adds Lee. “It’s a business decision. We need (LRI) as bad or worse as they need us.”

Follow the money

Perhaps the most disturbing aspect of this contract arrangement is the myriad of ways in which it guarantees a healthy profit for LRI and its parent company, Waste Connections Inc., on the backs of local ratepayers, says Washington state Sen. Marilyn Rasmussen, D-2nd District. It’s a guaranteed profit that seems to be a long time in the making for many on the inside of this deal and also one that’s confusing as hell for an average citizen to follow.

 

Still, with so much at stake, it’s certainly worth trying.

Waste Connections has been hawking the Pierce County market since its infancy as a company. In 1998, Waste Connections bought into the local market by merging with Murrey’s Disposal. The Murrey’s family of companies serves Edgewood, Fife, South Prairie, Wilkenson, Gig Harbor, the Gig Harbor Peninsula, Key Peninsula, Fox Island, Bonney Lake, Buckley, Carbonado, Milton, Orting, Puyallup, and Sumner. Tacoma Recycling, another part of the Murrey acquisition, helps recycle Pierce County government waste and materials collected as part of Tacoma’s curbside recycling program. In 2001, Waste Connections also acquired controlling interest of LRI, which manages disposal and transfer, from the LeMay family and the Murrey estate. 

In 2004, Waste Connections bought Northwest Container Inc., giving the company a huge slice of Pacific Northwest logistics and rail transportation market. The company has been hauling garbage and making money ever since. Last month, Waste Connections bought out Harold LeMay Enterprises Inc. for a little more than $300 million — $203 million or so in stock and another $100 million for the business and operations, according to filings with the U.S. Securities and Exchange Commission. Waste Connections has acknowledged that the LeMay acquisition is the largest in its history. 

 

Rasmussen and Wearn speculate that the contract recently approved by the County Council might have been a prerequisite to Waste Connections purchase of the LeMay empire. While that’s not known for certain, what is known is that Waste Connections likes long-term municipal contracts in markets where it can create a monopoly on waste handling. Waste Connections has stated that on a number of occasions, and the company’s history and rapid growth prove how well the strategy works. The approach is one of the many ways in which the company has grown from virtual nonexistence to the fourth largest waste handler in the country in just 10 years. It currently maintains a phenomenal 10 percent profit margin. 

The contract between Pierce County and LRI, Rasmussen speculates, guarantees that the substantial investment Waste Connections made when the company acquired LeMay will be profitable. 

“We asked over and over again why everything was so urgent. Why so soon? Why now? They (County Council) never answered,” says Rasmussen. “I suppose that it’s because they (Waste Connections) are not going to buy the company (LeMay) unless they get this sweetheart deal.” 

Interesting side note: the day of and the day after the contract approval was announced by The Associated Press, Waste Connections CEO Ron Mittlestaedt sold a total of nearly $12 million worth of Waste Connections stock, according to SEC filings. 

In Pierce County, the long-term contract and overwhelming monopoly over waste handling means that Waste Connections is likely to make a killing. The monopoly also means Waste Connections gets paid multiple times for the same service, says Rasmussen. 

“The exchange of money is the worst part,” she says. 

If the company has to build a rail transfer station so it can cart its garbage to Waste Connections’ landfill in Oregon, for example, LRI — which is owned by Waste Connections, remember — can raise rates to help pay for it. It’s worth noting that said rail transfer center would likely be used heavily by one of Waste Connections’ other companies — Northwest Container, which gets to charge LRI to haul waste out of the county through the transfer station Pierce County ratepayers helped fund. 

Haul it to where? Likely to a dump owned by Waste Connections. 

Furthermore, if Pierce County’s promised “aggressive” waste reduction and recycling goals cause LRI to lose money, the company can raise rates to make up the difference. A portion of the profits from said recycling operations would be raked in by LRI or one of Waste Connections’ local subsidiaries. In addition, Rasmussen points out that a great deal of the garbage collected by recycling operations never gets recycled. If there’s no market for recycled aluminum, glass, or plastics, for example, those “recycled” materials just end up in a landfill — such as the one owned by LRI. 

Also troubling within the new contract is the seeming abdication of veto power by the county for rate increases, combined with a host of potential triggers for making adjustments to rates outside standard protocol. Several “assumptions” within the contract stand to fail, says Rasmussen. When contract assumptions fail, according to the wording of the new contract, LRI gets to make adjustments to rates to ensure its profits. 

“They can just keep raising the rates for a number of reasons,” says Rasmussen, who has a storied and celebrated history as a defender of the environment. “The people are going to have to pay, or their grandkids are going to pay.”

If county officials don’t like the rate adjustments, Rasmussen adds, they’re bound by the contract to enter into arbitration — which means a third party group of professional negotiators gets to decide. Not county officials who represent ratepayers, but a disinterested third party. 

Wamback contends that the county’s position is better under this contract than in previous contracts with LRI. 

Arbitration — a nice way of saying private legal negotiation outside the courts — has become notorious for favoring corporations and private interests. Many corporations are known to hand pick arbiters that they know they can sway and manipulate. 

“There’s no chance for litigation if something goes wrong,” says Rasmussen. “There’s no recourse. They’re stuck.” 

Pierce County ratepayers, it seems, are stuck as well. 2036 is a long way away. 

Whose land(fill) is this, anyway? 

Graham residents also would like to know, given the current capacity and phenomenal profitability of Waste Connections, why LRI and its attorney would be sending a letter to County Executive Ladenburg, urging him to make expansion of the Graham landfill a public necessity. 

Well, for one — doing so would allow the county to condemn and move a road that Waste Connections needs, which several Graham residents have refused to sell. LRI needs that land to expand its footprint by another 31 acres, and if we’ve learned nothing else from this we know that landfill capacity equals big money. The land lies south of Woodbrook Road, which is the only access road to a small residential community. By moving the road, LRI can expand the landfill by 24 percent, or about 7 million cubic yards, according to the aforementioned document. At 0.8 tons per cubic yard, 7 million cubic yards at a system base rate of $93.50 per ton means about $520 million in possible revenues for LRI. 

 

The letter from LRI Attorney Daniel Syrdal, obtained via public records request and provided to the Weekly Volcano, appears to urge Ladenburg to condemn the property on behalf of LRI, a private corporation, ostensibly to help the county carry out its “public service” of waste disposal. Under Washington law, the county can’t condemn the land on behalf of a private company such as LRI.

But the county can condemn the land if it decides that storing garbage is a public use. While the county would indeed receive extra capacity for such a use by condemning the land, it would be difficult to untangle the hundreds of millions of dollars that LRI would make from the arrangement. 

“The potential for the county to exercise its authority to move the road through condemnation proceedings may provide the necessary impetus for Woodbrook to become more reasonable in its demands,” writes Syrdal to LRI Vice President Eddie Westmoreland and Norm LeMay. 

The letter was obtained from the records of County Executive Ladenburg, who has been a primary political driver of the contract. Another letter, from Ladenburg to Westmoreland, makes it clear that despite reservations Ladenburg is prepared to condemn Woodbrook Road. 

What’s more alarming to residents of the nearby Woodbrook subdivision is the fact that Waste Connections has been buying up parcels of land in and around their neighborhood. The concern, says Andy Bales, former president of the Woodbrook Homeowners Association, is that the county will use condemnation to further expand the Graham landfill and that people will lose more than just an access road. 

If suspicions are realized, they’ll lose their homes, and LRI will make even more money.  

“Whatever they do to get this road, that’s what they’ll do to our individual properties,” says Bales. 

“That really kind of shows you what kind of people we’re dealing with,” adds Wearn.

Ladenburg did not return phone calls seeking comment for this story.