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October 30, 2014

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Potential conflicts of interest loom over Silver State contract extension vote

Republic Silver State Disposal Inc.'s negotiations with local governments to keep exclusive possession of valley garbage services another 15 years has critics questioning the firm's relationship with elected officials.

Potential conflicts of interests, Silver State's monopoly on trash hauling and calls to open up bidding for the services have tainted the decision to extend the contract.

Las Vegas City Council members will decide Monday whether to extend Silver State's contract -- an extension worth more than $1 billion -- in exchange for $5.5 million to build a transfer station or needed parks.

The Clark County Commission often decides unanimously in favor of Silver State and did no differently last month when the company agreed to pay $36 million to clean up Sunrise Mountain landfill in return for a prolonged contract.

While City Council members are mulling over potential conflicts of interest before Monday's vote, commissioners with Silver State ties saw no problem with voting.

Commissioner Erin Kenny co-hosts annual Christmas parties with longtime friend and Silver State lobbyist John Pappageorge but has voted in favor of fee hikes and transfer stations without disclosing their relationship.

After Pappageorge clashed with former Clark County commissioner Don Schlesinger over the lobbyist's spending habits in the early 1990s, he sought Kenny to oust Schlesinger. He then assisted Kenny during her 1994 bid.

"I consider John Pappageorge a good friend. If I'm not mistaken, he doesn't lobby with local agencies, he only lobbies in the Legislature," said Kenny, defending her willingness to vote on Silver State issues.

Commissioners Bruce Woodbury and Yvonne Atkinson Gates turned away Silver State contributions during the 1996 election because of indictments handed down to the company's administrators amid upcoming decisions seen as controversial.

Board member Dario Herrera received the most money of any commissioner from Silver State during the November election, but insists the $20,000 contribution has no effect on his vote.

"I don't have any difficulty distinguishing what is right for my district," Herrera said. "I scrutinize everything and determine what will be in the best interest of my district."

The board members said the 15-year extension it recently granted was a no-brainer; it essentially indemnified the county from a federal lawsuit filed by the Environmental Protection Agency.

"We followed the recommendation from staff; this was a way to get a messy situation resolved regarding the liability of the landfill," Woodbury said.

Whether extending the company's exclusive franchise to pick up residential and commercial waste is worth $5.5 million to the city will be decided Monday.

And, an informal poll of council members shows the board intends to keep Silver State's monopoly on trash hauling intact until 2021 despite recent environmental concerns and the requests to open the competition.

City Finance Director Mark Vincent said Silver State's trash hauling operation in the city and county brings the company "somewhere in the $100 million area" annually, according to Silver State annual reports filed with the city.

A conservative base of $100 million multiplied by the 15 years proposed in the extension amounts to $1.5 billion. The city and the county impose franchise fees based on a percentage of the total revenue.

Jeff Maresh, the city's director of business services, did not return numerous calls Wednesday and Thursday seeking information about the franchise fee amount.

Still, sources familiar with the agreement, claim Silver State could still take in more than $1 billion over the life of the contract extension after it spends $36 million to clean the landfill and pays its franchise fees.

It's a proposition Mayor Oscar Goodman opposes.

"This community changes so rapidly, I'd hate to commit myself to something that was 10 or more years hence," Goodman said.

However, Goodman will be abstaining from Monday's vote because he and his law partner are part owners of property near Silver State's Apex landfill and he considers voting on the matter a conflict of interest.

Councilman Larry Brown also will abstain on the vote because in his part-time job with the Las Vegas Stars he helped coordinate Silver State's sponsorship of Make A Wish Foundation nights at Cashman Field.

Brown has written to the State Ethics Commission asking for an opinion on whether he should abstain. Since those decisions often take weeks, Brown tabled the item June 28, in part, to get more information on whether he could vote.

"It may be a perceived conflict and so I'm going to abstain," Brown said.

Other council members have suspected conflicts of interest with Silver State, but have not abstained from votes involving the trash giant in the past and don't plan to in the future.

Councilman Michael McDonald, in fact, asked that the Silver State vote again be placed on the council's agenda.

McDonald received $36,800 from Silver State and its related operations for his recent re-election campaign. He is also friends with Silver State President Steve Kalish, who hosted a fund-raiser for him. And, a woman McDonald has recently dated is employed by Silver State.

"Friendship aside, business is business," McDonald said. "I'm allowed to vote on this.

"The public perception may be, 'Did Steve Kalish buy Michael McDonald?' but the answer is no."

Silver State is one of the largest local contributors to political campaigns. In addition to McDonald, Silver State or its affiliated businesses donated $29,700 to Councilman Gary Reese's recent re-election campaign and $15,900 to Goodman's mayoral bid.

Brown received $7,500 for his 1997 election and Lynette Boggs McDonald -- who will be sworn in Monday as a council member -- received $1,500 from Silver State during her losing 1998 bid for State Assembly.

Boggs McDonald said she has not yet made up her mind about the vote, but she is worried about potential liability for the city as a result of federal orders that Silver State clean up its Sunrise landfill.

She seems to be leaning toward approval for that reason.

Sunrise was closed and improperly covered in 1993. Last year amid heavy rains, debris from the landfill was uncovered and it flowed into the Las Vegas Wash, leading to numerous environmental fines against the county, Republic DUMPCO, Silver State and its parent corporation, Republic Services Inc.

The Las Vegas Wash feeds Lake Mead, Southern Nevada's primary source of drinking water.

The proposed agreement with the city includes Republic's compliance with all Environmental Protection Agency orders -- estimated to cost the company $36 million.

Earlier this month, the Clark County Commission extended Silver State's exclusive garbage-collecting rights by 15 years until 2035. That agreement came in exchange for Silver State's promise to shore up the landfill, which is emitting methane and hydrogen sulfide gases.

Although EPA officials said they did not intend to hold the city liable for the Sunrise cleanup, McDonald said the city can't be too cautious.

"Our legal staff said we could be held liable, so I'm looking for indemnification," McDonald said.

He said when he weighs Silver State's "reasonable customer rates, twice a week pick-ups, indemnification from the lawsuit and $5.5 million" he's willing to approve the extension.

Reese agreed, although he said indemnification from any potential liability isn't an issue for him.

"We're always looking for money for parks," Reese said. "If you go out and open bid it, what would you get?

"If you have a car that's running great, why get rid of it?"

Although the proposed extension is not good for competition, it won't necessarily hurt consumers.

Republic Silver State charges $9.80 per month for residential trash hauling. Earlier this year, the city passed an ordinance tying future residential trash rates to increases in the consumer price index -- about 1.6 percent.

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