San Francisco ratepayers will soon get back $100 million in overpaid garbage collection fees in what appears to be the biggest revelation yet in the city’s widening public corruption scandal.
City Attorney Dennis Herrera said Thursday the money will soon be returned as part of a settlement of a lawsuit his office filed against Recology, the firm that long has had a monopoly contract to handle the city’s waste and recycling. The company also has to pay a $7 million fine and agree not to give gifts to city officials for four years as part of the settlement.
“Quite simply, Recology unfairly overcharged San Francisco ratepayers,” Herrera said in announcing the settlement. It was back in 2017, Herrera said, that then Public Works Director Mohammed Nuru approved a 14 percent rate hike for Recology, based on estimated revenues and expenses. Nuru is now facing federal bribery and corruption charges.
In late 2018, Recology officials notified the city that they failed to account for at least two revenue streams – a failure that Herrera said meant the company was essentially overcharging in its rates.
Herrera said that once other revenue was factored in, about half the rate hike could not be justified. But the city attorney said that even after the overcharging was apparent, Nuru, and the company, kept it quiet.
“It was something that was known -- DPW did nothing about it. Recology knew about it at the time and did nothing about it," said Herrera.
Meanwhile, Recology donated an influx of cash to a non-profit account -- that federal prosecutors now call a $1 million slush fund -- that Nuru used for parties, swag and other perks for his workers. A review by NBC Bay Area of documents obtained under the Public Records Act shows Recology gave – either directly or through other alligned non-profits – more than $800,000 to the fund managed by the San Francisco Parks Alliance non-profit.
“Mohammed Nuru may have had his challenges keeping the streets clean,” Herrera said, “but he clearly excelled in cronyism, slush funds and indifferent oversight.”
Herrera said the company only came clean and cooperated after being confronted by his office last year. Meanwhile, federal officials recently charged a former top Recology official with bribery in the Nuru scandal.
Former city supervisor Quentin Kopp is a longtime critic of the city’s guaranteed monopoly deal with Recology. He is pushing for a ballot measure to finally strike language in the City Charter so as to allow competitive bidding for the lucrative garbage contract.
“It’s unprecedented,” Kopp said about the $100 million overcharge. “Recology has ruled City Hall and the so-called city family for close to 95 years.” As a result, he said: “The rates we pay as San Francisco ratepayers are the highest of any city in Northern California.”
Recology CEO Sal Coniglio said in a statement Thursday that the company values “our customers, and making them whole for this mistake is our top priority.”
While acknowledging some inside the company had long been aware of that mistake, Recology said its company leadership acted as soon as they learned of it, adding: “We are grateful to the City Attorney for helping us reach a resolution that benefits our San Francisco customers. We are reviewing our internal processes and working with the City to ensure an issue like this never reoccurs.”
Refunds are expected to average $190 per customer, including the interest.
Herrera says rates will also go down starting next month.