Recology to pay $25M for ratepayer protections in settlement with San Francisco
SAN FRANCISCO – Recology, the company contracted by San Francisco to collect and recycle waste, has agreed to pay $25 million in settlement fees to the city to resolve issues found during a series of reviews, including having more profit generated from customer payments than necessary.
According to the settlement announced Tuesday, the funds will go into a new balancing account dedicated to protecting San Francisco customers from cost of living rates higher than the rate order set in 2017. Additionally, any future excess profits will be automatically deposited into the account.
Recology CEO Sal Coniglio said in a statement that the company strongly supports the increased effort to improve the rate-setting process and transparency. He said the company is working toward a "new era of accountability" with the help of the San Francisco Controller's Office and other city officials.
"Together, we share the same goal: providing the most environmentally sound refuse service, at competitive rates for our customers, with a fair wage for all Recology employee-owners," Coniglio said.
The agreement also requires the company's audited financial reports to be publicly posted and for the rate year to coincide with the company's fiscal year, so it is easier to compare the two financial statements.
"This is an important agreement between the City and Recology that benefits our ratepayers and furthers the necessary reforms we need to make to improve the integrity of our waste management system," Mayor London Breed said in a statement.
In March 2021, Recology previously agreed to refund $100 million to ratepayers for issuing higher garbage rates for residents in 2017. The settlement followed a subpoena from the San Francisco City Attorney's Office, after former Public Works Director Mohammed Nuru was arrested in 2020 for accepting bribes for preferential treatment in city contracting.
The new settlement satisfies the recommendations set by the Controller's Office in a Public Integrity Review report in May 2022 that revealed Recology made $23.4 million above their profit target. A balancing account was created to ensure Recology's targeted profit level can be met and adjusted if need be.
City Controller Ben Rosenfield said his office is planning a new process to create new rates for customers by October 2023. The voter-approved Proposition F on the June 2022 ballot made the city controller responsible for overviewing refuse rate changes alongside a three-person board.
"We're pleased to have reached an agreement on behalf of San Franciscans to return profits above target collected by Recology in recent years," Rosenfield said. "I want to extend my thanks to the team in our offices who hammered out this agreement, and to the new team at Recology who worked in good faith to do what was right."
City Attorney David Chiu said this agreement will help lessen the costs of future rate increases and hold Recology accountable if their profits go above the targeted margin.
"We appreciate Recology's new leadership coming to the table and increasing their transparency and accountability to ratepayers," Chiu said in a statement. "I am grateful to the deputy city attorneys in my Office who worked with the Controller to negotiate and secure this agreement."