Battle for trash hauling

What was once a small snow plowing company, with only the city of Hamtramck as a major customer, is now the dominant waste hauler in southeastern Michigan, with contracts for hauling trash and recycling for 55 municipalities, including 20 out of 62 communities in Oakland County. This growth by Rizzo Environmental Services has come at the expense of other waste haulers, and is now the subject of a public corruption probe by the FBI in Macomb County. While there currently is no known evidence of corruption by Rizzo in Oakland County, there has been a battle for supremacy and dominance in the county, and if numbers tell the story, that story says that Rizzo is currently the reigning king of trash hauling, a multi-million, if not billion dollar, industry. The battle for garbage disposal in Oakland County may seem like a strange war, but it's actually a classic conflict, a blazing battle over territory, money and power. The dirt on Rizzo, and how they became the king of the trash heap, may not be as salacious as what has happened in Macomb County. From research so far relative to Oakland County, it appears the company has a reputation for providing their customers with very good service at a very good price, often underbidding their competition. As for possible improprieties in Oakland County, or if the FBI is investigating any corruption in the county, Tim Wyley, FBI public affairs spokesperson said, “I would be able to neither confirm nor deny if we are looking into Rizzo in Oakland County. I have nothing I can share with you regarding any of our investigations with Rizzo or Oakland County.” Rizzo Environmental Services is in the process of being rebranded as GFL after a sale on October 3 to GFL Environmental (Greener for Life), a company valued at $2.4 billion out of Toronto, Canada, which operates in all of Canada's provinces. Rizzo was a family-owned business for over 50 years, since 1965, out of Sterling Heights. Early on, it was known as C&R Maintenance Inc., providing waste control services to home and business customers in metro Detroit, renting roll-off dumpsters, front-load containers and compactors of various sizes for home and commercial use, as well as landscaping and snow removal for some customers. The company also handled all forms of recycling. By 2012, the company was known as Rizzo Services. C&R Maintenance initially was a commercial maintenance company begun by Chuck Rizzo Sr. in 1965. Over the years, the company grew, operating Snowone, a snow removal company that is now defunct; Rizzo; Rizzo Services; Rizzo Express, a waste management service; and Titan National, a national vehicle shipping company. Rizzo Express and Titan National are both no longer operational businesses. Over time, Chuck Rizzo Jr. joined his father in the business, and was CEO and president of the company when it was sold recently to GFL. According to numerous published reports, at least three Macomb Township officials are charged with taking bribes from Rizzo Environmental Services in exchange for helping the trash hauling company win a contract. The FBI has announced they are conducting a full public corruption probe of “pay-to-play” schemes and charging the politicians behind them in Macomb County, stating, “this is an extensive investigation into systemic corruption.” In light of that news, Chuck Rizzo Jr. resigned, as of October 25, from the company he and his father created. According to published reports, Rizzo Environmental Services is cooperating with the government after getting caught allegedly paying bribes to Macomb County trustee Dean Reynolds who was charged with selling his vote, for $75,000 in cash and a free lawyer in his divorce, in exchange for pushing through an $18 million deal with Rizzo Environmental Services. Macomb County trustee Clifford Freitas was also charged with accepting a cash bribe, of $7,500, for providing the company with”sensitive bidding information” to help Rizzo win a contract in 2015. According to a criminal complaint, Freitas also accepted a $35,000 bribe from the company to make sure that Macomb Township residents would be billed for garbage services on their water bills in order to save money for Rizzo Environmental Services. Frietas and Reynolds have declined comment. When called for comment on this story, on how Rizzo grew to become the dominant waste hauler of Oakland County, Chuck Rizzo Jr., hung up the phone on Downtown newsmagazine. GFL Environmental Inc. President and CEO Patrick Dovigi made the announcement, “In the best interests of the company and our customers, Chuck Rizzo Jr. has resigned, effective immediately. I will oversee Rizzo's business on an interim basis until further notice.” Dovigi also announced that he was immediately having Rizzo's signature red trucks repainted green and the Rizzo logo replaced with GFL. While he said that was in the plans when he purchased the company, he was moving it up quicker, given what had transpired. Dovigi and GFL, which owns waste hauling companies in every province of Canada except Prince Edward Island, purchased Rizzo from Kinderhook Industries, a private equity firm that acquired Rizzo in 2012, allowing it to expand. Rizzo was GFL's first U.S. acquisition. At that time, Rizzo Services, it's name at the time, provided collection services in 16 municipalities throughout southeast Michigan. At the time of its acquisition, Kinderhook stated that Rizzo represented the eleventh environmental services transaction they had completed in the previous four years. They did not reveal financial terms of the transaction. At the time of its investment, Kinderhook managing director Rob Michalik said, “Rizzo has had extraordinary growth due to its loyal customer base, market leading service and exceptional management team led by Chuck Rizzo Jr. who has 25 years of waste industry knowledge.” “The recapitalization of Rizzo by Kinderhook will enable the company to continue to expand its service footprint throughout southeast Michigan. Our partnership with Kinderhook will enable us to further grow our platform and expand our current service offerings,” Chuck Rizzo Jr. said on September 13, 2012, after its acquisition. Growing the platform and expanding service offerings is precisely what Rizzo did over the past four years, going from the provider of waste management services to 16 communities in 2012 to 55 in 2016. Included in those numbers are 20 in Oakland County, many of which are relatively new contracts. Communities now with Rizzo under contract include Bloomfield Township, Bloomfield Hills, Fenton, Franklin, Highland Township, Keego Harbor, Lake Orion, Madison Heights, Milford Township, Milford Village, Orchard Lake, Rochester, Rochester Hills, S. Lyon, Royal Oak, Southfield, Sylvan Lake, Walled Lake and West Bloomfield. Southfield, Franklin and Walled Lake all have contracts which began in the last few months; several other municipalities awarded Rizzo their waste management contract within the last couple of years. The most significant new contract Rizzo acquired in the last four years is for portions of the city of Detroit, which the company received in 2013, from the city's emergency manager, under a five-year contract. It shares services for the city with Advanced Disposal. As Rizzo expanded its tentacles throughout Oakland County, other hauling companies lost their contracts. Many came at the expense of Waste Management, a Houston, Texas-based recycling and waste management company that alleges it is North America's leading provider of integrated solid waste services. Currently, Waste Management has a contract with four Oakland County municipalities: Farmington, Farmington Hills, the city of Novi and Northville. The firm previously also had contracts with Bloomfield Township, Franklin, Madison Heights, Royal Oak and Southfield in Oakland County, along with eight communities in Macomb County, and another eight in Wayne County, all of which have switched to Rizzo. “A decade ago, Waste Management served approximately 45 communities in the tri-county area. Twenty-one of those contracts are now being serviced by Rizzo Environmental. In some instances, bid processes we've certainly not seen before, like allowing bids to be revised and resubmitted, were observed,” said Tom Horton, spokesperson for Waste Management. “We won’t speculate on factors that have helped them win bids. But Waste Management continues to have a major footprint in and commitment to southeast Michigan and across the state, with more than 500 trucks daily collecting solid waste on behalf of our highly valued customers. We will continue to watch as the recently announced investigation unfolds.” “We have a five-year contract (with Waste Management) that is set to expire on June 1, 2017. It was extended once. Sometime between now and then, we will be choosing a new contractor. It may be Waste Management, or we may choose to bid it out,” said Jim Gallogly, director of the department of public works for Northville. “It's been forever” that Farmington has had a contract with Waste Management, said department of public works director Charles Eudy said. “I've been here 22 years, and they've had it for at least that long.” Many of the municipalities have five, eight, even 10-year contracts with Rizzo, including Rochester, which first signed a contract with Rizzo in 2010, followed by a contract extension through 2017. An official in S. Lyon said the community had a 10-year contract with Duncan, which was acquired by Rizzo. Why tie up their municipalities with such lengthy periods of time? One official explained that this is the Rizzo business model, which has helped them grow their enterprise and their dominance. “A contract with eight years left is more valuable than one with two years left,” the official said, who did not want to be identified. “It is considerably more valuable to finance, and you can approach banks to loan you more money for trucks and equipment. Who would give you a contract for eight years with all of the fluctuations of gas and other variables? But if you have to ramp yourself up in order to grow, you need someone to loan to you so you can borrow to get more equipment, so you need those long-term contracts. They're good for the municipality, and they're good for the company,” he explained. “If they have to eat a little bit of each contract, the valuation of the company is still growing. The goal is to sell the company, and the company is way more valuable if they have more contracts. And they have just resold the company.” He said that between the first hedge fund, Kinderhook, which provided a huge infusion of capital to allow Rizzo to grow, and the purchase by GFL, Rizzo's valuation had increased by 50 percent, “so the second (buyer) paid much more for (the company). There's a tremendous amount of revenue coming out, and the second buyer was willing to pay more. That's why Rizzo is willing to be the low bidder, even fix their contracts. They just understand the system, and there's nothing wrong with that.” Waste Management, however, beat out Rizzo Environmental for a new contract with the city of Novi which began July 1, 2016, said Mike Csapo, general manager of Resource Recovery and Recycling Authority of Southeast Michigan (RRRASOC), a municipal solid waste provider to nine communities, negotiating contracts on behalf of Southfield, S. Lyon, Farmington, Farmington Hills, Novi, Walled Lake, Wixom, the Village of Milford and Milford Township. Csapo explained that RRRASOC helps their member cities deploy solid waste contracts for their communities. “Because we contract jointly for all events with a private service contractor, we get very good prices versus a small community for one event.” He said the consortium helps the community determine if they are getting good service, are they getting good pricing, have they bid out the contract previously, and are there comparable communities which have bid their contract out recently that can be used as a comparison. Southeastern Oakland County Resource Recovery Authority (SOCCRA) is another municipal grouping which negotiates contracts for its 12 member communities, which includes Berkley, Beverly Hills, Birmingham, Clawson, Ferndale, Hazel Park, Huntington Woods, Lathrup Village, Oak Park, Pleasant Ridge, Royal Oak and Troy. Jeff McKean, general manager of SOCCRA, said, “We keep an eye on services and prices on each community. We did a very extensive RFP (request for proposal) process for all the communities, and two went with Rizzo – Royal Oak and Hazel Park. Car Trucking has had long contracts with Birmingham, Beverly Hills and Ferndale; the others went with Tringali (Sanitation) for a 10-year contract, from July 1- June 30, 2017.” McKean said SOCCRA made the decision to extend the contract with Car Trucking for Birmingham, Beverly Hills and Ferndale for another 10 years, until June 30, 2027; Tringali's contract with Berkley, Clawson, Huntington Woods, Lathrup Village, Oak Park, Pleasant Ridge and Troy was also extended through June 30, 2027. He said they decided to extend the contracts, without going out to bid once again, because “we have very good contractors that provide very good services. For our communities, service is more important than price. “We also did a market survey of all the prices being charged in southeastern Michigan, and our prices are very competitive, so we thought there was no need to do a bid process,” McKean continued. “There's been no pushback from any of our communities.” Royal Oak has had a contract for the last 9.5 years with Rizzo, Greg Rassel, director of public service said. “The contract was for 10 years,” Rassel said, noting the 10 years is up July 1, 2017. He said SOCCRA is negotiating a contract extension for Royal Oak through 2027. McKean said that Hazel Park, which has had Tringali as a contractor for many years, indicated they wanted to switch contracts, and they are switching to Rizzo through 2027. A representative from Tringali declined to comment for this article, citing a fear of reprisals. RRRASOC's Csapo, which helped both Novi and Southfield bid out contracts this past spring, with Southfield choosing Rizzo and Novi selecting Waste Management, said they both went through a similar bid process. The city of Southfield chose Rizzo for an eight-year contract with a five-year renewal contract available, with their contract going into effect July 1, as a result of a comparative bid. “It was managed by the city's purchasing department, with our assistance and evaluation,” Csapo said. He said the bids were reviewed by Southfield's administration, then by their finance committee, and finally by the Southfield City Council in a study session, ultimately winning approval from city council in an open meeting. Just the opposite, the city of Novi chose Waste Management when they went through a similar process, Csapo said, after having had a subscription process, where each homeowner or subdivision privately contracted with individual waste hauling contractors. Novi followed a very lengthy process where they also looked at services and prices in several communities, developed an RFP with the help of RRRASOC, then went through an administrative review, a consultant review committee, and then city council, where they awarded a five-year contract with a three-year contract extension available, to Waste Management, effective July 1, 2016. “Private contracting is more commonly done in rural townships. The data shows that when you have a subscription process, you pay higher prices. It's simple math. There's the economies of scale and service densities that allows for better pricing, and it provides for less trucks on the roads, and more control of the level of services, as well as trash gets set out at the street less frequently,” Csapo said. In Oakland County, several municipalities still have private contractors for their residents' trash collection. Many are in northern and western Oakland Country, from Brandon Township, Clarkston, Groveland Township, Holly Township, Independence Township, Lake Angelus, Lyon Township, Oakland Township, Orion Township, Ortonville, Oxford Township, Southfield Township and Springfield Township. There are also a smattering of other companies operating in Oakland County, with contracts for one, two or three municipalities. Csapo sees the growth of Rizzo as “one of being able to meet or exceed the level of other contractors. We called around to other Rizzo customers (when doing Southfield's bids) to check and evaluate their level of service. Invariably, it was very good. That's always the number one concern. Service is the primary concern – besides price. Will the service be of the caliber that residents deserve? When you call around to existing communities and they say it's been very good, that's what matters. Then, with price – with a competitive bidding price, in one case – Southfield – they were the low bidder; in another – Novi – Waste Management was the clear low bidder. “Just being subjective to the marketplace, you look at price and performance,” Csapo continued. “It appears in many of the competitive bids, Rizzo has been the consistent low bidder while providing good service. Numerous communities cite their satisfaction with Rizzo's service. “Our experience is that they provide very good service at very good rates,” said SOCCRA's McKean. “We find service is very important to customers – 'We don't just want our garbage gone; we want it done properly.' We find many people have very good experiences with Rizzo. We hear many stories like that.” Jerry McCallum, director of city services for Orchard Lake Village, said they had had an original contract with Republic that ended in 2015, and signed a five-year contract with Rizzo, beginning that year. “We went out to bid, and their (Rizzo) prices – you couldn't beat them. Every community says the same thing. Republic came to us and said they would keep their prices the same, and we said, no, we have to bid our contracts out,” McCallum said. “You're getting a very good service for a very competitive price. Why wouldn't we want to save our community money? With a five-year contract, I imagine we will bid it out once again because being fiscally responsible, our council tends to bid out large contracts.” Bloomfield Township first signed an eight-year contract with Rizzo in 2007 after an advertised open bid, where six companies bid on the business. Supervisor Leo Savoie said the township board unanimously approved the contract with Rizzo because it came in lowest. “At the time, staff reviewed a number of competitive bids in neighboring communities as well, and did comparative bids, and felt that reviews of service were excellent, so we went with them.” In November 2014, the township board extended the contract for another eight years, through 2023, as Rizzo said prices would remain flat if there was no bid of the contract. Only trustee Brian Kepes voted against the contract extension, as he wanted the contract to go out to bid. No one has been dissatisfied with the service, Savoie said. “I voted against it because I thought it was the appropriate thing” to bid the work out, Kepes said. SOCCRA's McKean said, “I've been surprised at how successful they've been. You typically don't see one company dominating like that, and they've been dominating for the last five years.” Across the country, it's not unusual for one trash hauler to become dominant in a region, although it can vary from region to region, said Chris Dougherty, spokesperson for the National Waste and Recycling Association. “There are more than 10,000 communities that have waste service contracts. It's a very competitive industry, and there is no one trend to point to. Every community, every region, does it differently,” Dougherty said. “It is not uncommon for one company to get momentum and accumulate contracts. But everything just varies by region. Some companies are very vertically integrated, having their own landfill, which they also benefit from having other waste haulers use their landfills. In any industry, vertical integration is a good thing because it leads to economies of scale.” Rizzo dropped its plan for a landfill in 2014. It had proposed a landfill in Macomb County, as well as had options in St. Clair County and for the Clinton Valley Farms landfill in Lenox Township (Macomb). Instead, reports stated that they, along with Advanced Disposal, agreed to dispose trash at the Detroit Renewable Energy waste to energy plant in Detroit, also known as the Detroit incinerator. An individual in the business, who requested to remain anonymous, inferred that Rizzo's growth has not been all great service at low bids. “You don't just get that big – it doesn't just happen. It's easy to figure out. It's greed when you get to 55 communities. Anywhere Rizzo is, there's any issue. You're not that lucky.” Publicly, Rizzo has donated thousands of dollars to the campaigns of just about anyone – and everyone – running for public office in Oakland County, as has Waste Management to a lesser extent. Both donate through political action committees – PACs. Rizzo formed its PAC in 2013, donating $5,000 to county executive L. Brooks Patterson in the last couple of years; $8,400 to county sheriff Michael Bouchard; $1,000 to Mike Gingell, chairman of the Oakland County Board of Commissioners; $250 to Oakland County commissioner Shelley Taub (R-Birmingham, Bloomfield Hills, Bloomfield Township); $5,000 to state Sen. Majority Floor Leader Mike Kowall (R-White Lake) and $550 to his wife Eileen, a county commissioner; $500 to state Sen. Marty Knollenberg (Troy, Birmingham, Rochester, Rochester Hills); as well as a largesse of donations to council members and commissioners in numerous municipalities, including Rochester Mayor Cathy Daldin, who received $250. State Rep. Mike McCready (R-Birmingham, Bloomfield Township, Bloomfield Hills) received $1,000, and Bloomfield Township supervisor Leo Savoie and trustee Brian Kepes each received $500 from Rizzo, but all three recently donated their political contributions from Rizzo to charity to avoid any appearance of impropriety given the Macomb investigation. While there is nothing illegal, or unusual, to see corporations donating to lawmakers, the scope of Rizzo's donations, and their pervasiveness throughout much of Oakland County, appears more aggressive than others, including Waste Management and Republic. Tringali does not have a PAC. Appearances do not necessarily insinuate guilt. Since the recent Macomb County corruption probe, attorneys for many municipalities are examining their Rizzo contracts to see if there is any contractual implications from their acquisition by GFL, as all of the contracts have a clause stating that they do not have to be assigned to another contractor without prior written approval by the governing council. One official said that GFL is asserting that no assignment is necessary because its purchase was strictly a financial deal. But ultimately, if communities are satisfied that GFL is providing the same good service that Rizzo had, and that the communities expect, there is little likelihood contracts will be voided. “Communities have to decide whether they're still getting very good service at a very good price, and if they would get the same service at the same price if they voided the contract and went back out to bid with another company,” the official noted. “Since the FBI investigation of Rizzo, we've been keeping a close eye on the situation,” said SOCCRA's McKean. “So far, Rizzo hasn't been charged with any wrongdoing.”