SMA approves advancing landfill negotiation process

When it comes to a final decision by the Sallisaw Municipal Authority on the unsolicited offer to purchase the Sallisaw Municipal Landfill facility and the city sanitation collection services, the answer is short, unlike the process itself. Expect it to be a long process, which echoes board chairman Ernie Martens’ warning on May 8: “This is not a decision that’s gonna be made in a week, I can promise you that. We need to go through this process. If it takes two months, it’ll take two months.”

The board was reminded Tuesday that the mills of the gods grind slowly, and any expectation that a final vote on the future of the 1,200-acre facility is just around the corner must be tempered with the realization that the verdict will be measured not by a watch, but by a calendar.

To be sure, the SMA board is tilling virgin soil with a decision process that didn’t exist as recently as three weeks ago. This is uncharted territory for board members Martens, Josh Bailey, Ronnie Lowe, Julian Mendiola and Kristin Peerson, who also comprise the Board of City Commissioners.

So at the conclusion of the city’s two-day budget meeting, the board directed City Manager Keith Skelton to draft a letter of intent with CARDS Holdings Inc., the Springdale, Ark., recycling and waste management company that approached the city with a $21.5 million proposal that triggered a contentious, standing-room-only May 8 public hearing at which 10 citizens voiced stern opposition to the purchase. The letter of intent, which Skelton said could be ready for the June 12 SMA meeting, authorizes the city manager to engage in talks with CARDS to address any concerns and stipulate any considerations, expectations and/or requirements which would be part of any sales contract.

Keith Skelton

When Mendiola and Bailey questioned the expediency for drafting the letter of intent, Skelton agreed that a special meeting could be called prior to the June 12 regular meeting to approve the authorization document, if it is complete.

“That letter of intent will allow us to discuss, basically, anything that’s been offered, from the original offer to the amended offer, increased tonnage the first five years, even to the public-private partnership,” Skelton summarized for the board.

But the city manager mitigated any enthusiasm for a swift schedule, noting that letters of intent often stipulate a time period for negotiations, such as within 90 days, for example. “That’s not saying it’s gonna take 90 days. It might take 10 days, might take two days. But I fully expect 10 to 20 days,” Skelton told the board.

“It’s a tough decision, I know. Whichever way we go, I can guarantee you, I’m gonna look out for the county. That’s the No. 1 goal, look out for the city and the county,” Skelton promised.

When a discussion with CARDS gets underway, Skelton said he has definite ideas and requirements he will share that he declined to reveal in Tuesday’s open forum.

“I’ll throw my ideas out there, what I want and what I’m gonna be steadfast on,” Skelton said.

Why consider selling?

Sallisaw is one of only a handful of Oklahoma cities with a municipal landfill. And those that operate their own facility are finding it to be an expensive undertaking.

“There’s a reason why cities are getting out of the landfill business,” Martens observed.

Then Skelton elaborated, explaining that most people don’t know and cannot appreciate “what it costs to run a landfill. There’s not many municipal governments that run landfills. The ones that do run a landfill, they run it lean and they don’t have the space that we have.

“Jamie [Phillips, Sanitation/Landfill supervisor] will probably agree with me that operations out there, we run it pretty lean. There’s a lot of things that he needs and doesn’t have out there. He definitely needs newer equipment, and things of that nature.

“The landfill’s at the point right now where it’s finishing out Phase 1, getting ready for Phase 2. We’re seeing that equipment is getting more worn by the day,” Skelton said, noting that replacing equipment which can cost $500,000 or more “is putting a strain on city finances. We’re already stretching our budget.”

Skelton warned the board members that if they were to vote to continue running the landfill, they should also be prepared to increase tip fees for waste disposal to $60 per ton as of July 1. The current tip fee is $34 per ton.

Skelton predicted that when citizens start seeing increases in rates and constraints to the city budget, objections to such aggressive options will diminish.

“I’d entertain any option that they have right now, because I know the budget strains. I’ve worked for the city for 34 years, and the landfill’s always been a budget problem with the city of Sallisaw. It never has really made a significant profit in order to keep things up like they should,” Lowe said, citing the financial strain of maintaining and even replacing equipment as a significant impact.

“I’ll bake cookies. We’ll have a bake sale,” Bailey deadpanned.

“It’ll take a lot of cookies to buy a compactor,” Skelton responded about replacing one of the most expensive pieces of landfill equipment which can cost almost $1 million.

A partnership?

Among the options under consideration is a public-private partnership between Sallisaw and CARDS. Simplified, and as one of probably several scenarios, the city would retain ownership of the landfill and continue collection services, and CARDS would run the landfill.

“To me, the public-private partnership — it’s working in other communities — the key is having the proper arrangement, and making sure you’re protected. That’s something that we would definitely do. As I’ve stated, we’ll protect the city and the county going forward,” Skelton said.

“One of the things that you’ll see if this does happen is the operation out there will become more efficient. Non-methane-generating trash will be sorted out and not placed in the landfill. The only thing you’ll see going into the landfill is organics. Organics are gonna be able to start building methane from Day One. So that methane royalty is gonna increase over the years. As that methane increases, the methane plant runs more, that’s more electric sales for us.” Sallisaw is working with Sparq Renewables to harvest methane from the landfill, a royalty expected to generate $300,000 to $500,000 per year for the city, a revenue stream that would not be compromised should the landfill be sold.

Ernie Martens

Both Martens and Skelton are in favor of the city continuing to provide collection services in order to retain control of customer service.

“My intent is to keep collection services — keep the employees, trucks, continue running collections, that’s my intent,” Skelton said.

Martens then asked Dan Christensen, president of CARDS, if a public-private partnership option is attractive to CARDS.

“Yes, either option is attractive to us. We want this to work,” Christensen said.

But Bailey, who on May 8 was a vocal opponent to considering the purchase offer, remained steadfast in his opposition.

“I can’t, with a clear conscience, be on board with this,” Bailey maintained. “My voters say put it to bed, and that’s where my vote’s at. Let’s get back to running the city.”

Similarly, Peerson reiterated her remarks from a week earlier that all the feedback she’s received has been negative.

But Mendiola wanted to explore the life span of the landfill further, asking Christensen about the effect of improved compaction at the landfill and increased recycling.

“They’re telling me that y’all can do 350 tons and have the same amount of years, or more years,” Mendiola said, inviting a response from Christensen.

“The preservational life of the site will serve the surrounding communities, and will not be depleted by out-of-state waste or out-of-area waste. I came up with a figure that is something like 80 years, even with this increased time,” Christensen said. “Using about a 20% diversion rate for recycling, some organics that could be composted and then trucking those recyclable materials back to the processing facility, and even though we increased that daily throughput, the life stays the same.”

Even more money

Then Christensen delved into the financial aspects of the proposal.

Dan Christensen

“When I ran the numbers out for 80 years, [it’s] $112 million for the life of the site. That’s a big number,” Christensen said, forecasting the city’s monetary benefit.

“Our goal is not to push out any current customers. We want this to be profitable under our ownership, and that requires the tons, not just our own tons, but tons from others. That, coupled with the fact that we would be relocating a number of significant paying jobs to this area — could be something like 25 jobs at about $75,000 apiece currently housed in another state — it is a real benefit, plus all of our spend is tax spend. When you guys spend money to build up the landfill, it’s not generating any sales tax. Ours would. That’s something like $4 million we would spend, that’s taxable. So that number gets closer to $130 million of monetary benefit.”

Christensen said trucking recyclable materials to the CARDS processing facility would involve as many as 25 semis daily.

“We’ve laid our cards on the table,” Christensen concluded in making his case to the city. “It’s become public, very public. It’s really easy for people (competitors) to jump in here now and throw offers out there, what that will or could try to do. So I provided [to Keith Skelton] a study of all the business acquisitions in our space, environmental services, over the last two years. The average of these high-profile transactions was around 13 times [their] earnings [prior to CARDS taking control]. The highest was around 18 times. What we’re offering is something like 50 times your earnings. So the thought that anyone could pay more than we can is just not possible. We have the tons to deliver, and the royalty amount is going to be drastically impacted if you were to put this under the control of someone with a fraction of the volume we currently control.

“So when you think about the longterm benefit, you’re already speaking to the most viable option, that’s all we can offer,” Christensen said.

Other options?

But since the May 1 unsolicited offer to purchase the landfill and collection services, a nagging question in the back of their mind for many is whether the proposal from CARDS really is the best Sallisaw can do.

So Martens verbalized Tuesday what many were thinking.

“Here’s what I would suggest. If it’s appropriate at this point to say … it may not be CARDS … send it out for RFPs to see who wants to bid this and come up with a proposal and look at all the proposals and see which one is the best proposal. Would that be logical way to go at this point, to see what is the best proposal out there from the best company?”

Then, as if no one had thought it a possibility, Martens asked city attorney John Robert Montgomery, “Legally, are we required to do a bid process?” Montgomery quickly said it is not a requirement for the SMA.

But Martens, reiterating that Sallisaw is in the minority among cities that run municipal landfills, told the board that other cities in the county want Sallisaw to continue to operate its landfill because relieves the other cities of the headaches and expense running a landfill incurs.

That’s when it was apparent CARDS may not be the only entity interested in Sallisaw’s landfill.

Monty Lenington

Monty Lenington, Roland’s town administrator who gave an impassioned presentation during the May 8 public hearing, was quick to respond.

“If you’re insistent that you want to sell the landfill for the city of Sallisaw and no one wants to offer it, then I am perfectly willing to partner with Vian and Muldrow to pay you exactly what they are offering here, and operate it as an inter-local trust and keep local, public control,” Lenington told Martens. “I’m willing to put my money where my mouth is on this deal, so stop saying that it’s not me willing to operate it, because I am.

“I’ve seen the numbers, I’ve looked at your budget, I’ve looked at your audits for the last couple of years, and I still think it’s a good deal, and as I told CARDS when they came to see me Friday, I think that this deal is laughable for the value that it’s putting on the amount of capacity this landfill has.”

Skelton then confronted his Roland counterpart. “Do you have authorization from your board” to enter into a contract to match CARDS’ offer?

“I have spoke to some of my board members, and they are willing to do it,” Lenington assured.

“Do you have authorization?” Skelton repeated.

“I can guarantee you that I can have it to you in two days. My board is on board,” Lenington pledged.

“With all due respect, Monty, you and I both know state laws that prevent concessions and discussing the purchase of land,” Skelton concluded.

Another player

Although the proposed inter-local trust by Sallisaw’s three county neighbors may not be a viable alternative, Bailey told his colleagues he believes all offers should be reviewed.

“He (Christensen) says he has the best deal,” Bailey said, advocating for a bid process. “If he has the best deal, then we have nothing to worry about.”

Not to be left out of any opportunity to become part of the bid process, Don Collins of Republic Services asked to be heard.

“This is an attractive partnership for us. We would love to have the opportunity to provide a proposal, different than what they’re proposing, but certainly our version of a really great partnership proposal for Sallisaw and this county area,” the charismatic Collins told the board.

Republic is a $13 million nationwide waste collection company with 2,400 city and county collection contracts, and operates 206 landfills, with 26 landfills in the seven-state area that includes Oklahoma, Arkansas, Tennessee, Kentucky, Missouri and Illinois, Collins told the board. He said Republic has six landfills in Oklahoma, but none in the Sequoyah County area.

“We’re not going to try to tell you how you should do it,” Collins assured. “We’re gonna listen to how you wanna do it and we’re gonna help you make that happen.

Don Collins

“Take the money out of it, forget about the money — what do you really want? Sounds like what you want is a safe, dependable place that you can get rid of your garbage. You don’t wanna lose any property that the city has owned, that the ancestors of the community have worked hard to build that landfill and put it in place. So at the end of the day, there’s more than one way to skin a cat, and we skin a bunch of ’em,” Collins said.

“We can be great partners for you to help you get what you want. We can help with the financial results. We can help with the closure [of the landfill], we have no problem with the post-closure, the 30 years after the landfill closes, ’cause we’ll be around, and we’ll be around for many, many years to come.”

Advocating for the bid process and the opportunity for Republic to submit a proposal, Collins recommended the board choose “the fastest runner, the strongest player, the company that you feel most comfortable, that you can move forward with as a partner for the community.”

“The hardest part of a landfill is that it’s a never-ending construction project. From the minute you start that landfill, you’ve signed up for a never-ending construction project. Imagine, anything else you’ve ever built, if you had to keep building it 10 years later, at 15 years later and 20 years later,” Collins said, painting a picture for the board, “because the cost of building stuff keeps going up, so the gap between what you’re charging and what it’s costing you to continue to operate that landfill starts to widen. Something has to happen. You’ve got to do something aggressive to fill that gap. Maybe you sell it to somebody and wash your hands of it. Maybe you have a partnership with a company that can help you get the money you need but also find additional volume, because when the costs are going up, there’s two ways that you can offset that. You can either grow your community, which the census said that’s not happening, or you can find more volume and bring that in from some of the surrounding areas.”

Republic has two landfills in eastern Arkansas as well as two in Memphis, and handles collection for Memphis and Las Vegas through a public-private partnership.

But Christensen had the last word. “He told you they don’t have a landfill in this area. That’s simply not true,” Christensen warned the board. “They have one about 40 miles from here. But when the royalties got too expensive, they elected to stop taking waste entirely. They have hundreds of acres empty right now that could take waste, but they elected not to.”

CARDS and Skelton will be at the negotiating table as soon as the SMA board approves the forthcoming letter of intent.