hen Tony Macchiano and Bob Molinaro set up shop in 1969, they never dreamed that the small town of Pleasanton and its 12,000 population would grow to over 72,000 people 45 years later. Tony worked on a tractor, bulldozing garbage seven days a week while Bob hauled it away to a landfill just outside of town.
Times have changed. And although Tony and Bob still run the company, Pleasanton Garbage Service today utilizes some of the best technology available to refuse collectors in the country, even picking up containers at homes and businesses with natural-gas-powered trucks that are reasonably emission-free. In fact, it's these technologies and ongoing, stepped up environmental and regulatory requirements that are digging into PGS's profits while also forcing the company to seek expanded service areas.
So it's a concern that the decades of close, cooperative working relations with the city of Pleasanton — that has regularly approved a franchise agreement with PGS since June 1989 — is facing troubling times. Last week, the City Council rejected for a second year in a row PGS's bid for a double-digit rate increase, voting instead for a 7.8% hike effective next Tuesday, April 1, well below the 12.15% PGS said it needs for all of 2014. Macchiano and Molinaro were at the meeting and begrudgingly accepted the lower rate increase, but they'll no doubt be back to seek an upward adjustment.
It was also clear from comments made by Assistant City Manager Steve Bocian that negotiations with PGS, historically easy-going, have entered troubled waters. For the first time, City Councilwomen Cheryl Cook-Kallio and Karla Brown, who have joined Bocian and a consulting firm in PGS negotiations, said the disclosures by PGS and its allied contractors lacked the transparency the Pleasanton government needs to make contractual decisions. They also indicated a need to re-look at the PGS franchise, which expires in five years.
National public accounting and consulting firm Crowe Horwath recently audited, at the city of Pleasanton's request, financial information PGS made available. Although PGS made relevant financial data available, it was less forthcoming on how charges are calculated by firms such as Recycling & Resource Recovery Systems and others that carry waste and recycled materials to other locations.
There was a material profit component in RRRS related-party charges that Crowe couldn't precisely determine through the information provided by PGS. Those charges affect how much PGS should be charging Pleasanton customers. As an example, Crowe said the $145 per hour charged by RRRS is well above the $100 an hour other carriers use to truck material to landfills.
In another finding, Crowe said repair and maintenance charges for PGS trucks appear to exceed industry averages. Crowe also examined PGS costs related to employee benefits, fuel and oil, taxes and licenses, even postage and office supplies. For the most part, Crowe found these expenses in line with industry standards, but still not sufficient to warrant the 12% rate increase PGS wants. It recommended 7.8%, and the council agreed.
Bocian and the two council representatives seemed most concerned with the lack of progress they made on discussing the PGS franchise. As a result, the council asked city staff to conduct a competitive process for a refuse provider after the PGS franchise expires in 2019.
Let's hope both sides can find a smoother road to travel.
Macchiano and Molinaro are longtime residents here, both are active in Pleasanton civic and professional organizations and frequently contribute their time and skills on projects that benefit the community. Macchiano, who had a construction and plastering business before moving here, worked on refurbishing the Palace of Fine Arts and the Bank of America building in San Francisco. He married Molinaro's sister and then joined in the purchase of the old Pleasanton Garbage Company. Active in the Pleasanton Lions Club, Macchiano is known for his famous barbecued chicken or steak dinners that he and the Lions Club offer frequently at community events.
During recent deliberations by the East Pleasanton Specific Plan Task Force, some consideration was given to helping PGS relocate its operations farther east on an extended Busch Road so that it might also seek service contracts with other cities, including Livermore. That could help PGS finance the millions of dollars it now spends on state-of-the-art equipment while also allowing it to keep lower collection rates in Pleasanton as demanded by the City Council.