The Truth About the Trash Talk
The Governor’s Office does not deny that years of political gridlock on the closure of the Ordot Dump may have necessitated the need for a federal receiver. However, the goal of the receiver should have been to provide Guam with the best and the most economical solution. In light of our review of how the bond proceeds have been spent, that does not appear to be the case.
Thus our goal in addressing the solid waste issues has always been to provide transparency and accountability in the expenditure of government funds. We feel it is quickly reaching the point where $85-100 per month trash collection fees will be inevitable after the solid waste system is returned to the Government of Guam. Commercial collection will also double, resulting in those costs being passed on to customers of commercial establishments. Despite the fact that GBB continues to rely on the federal court’s authorization to spend taxpayer money, it is the taxpayers and the ratepayers of Guam who will have to repay this money long after GBB has left Guam.
The predominant response from GBB has been that it could not have known how much the whole project was going to cost when it provided GovGuam with the estimates that it used to borrow over $200 million. During a recent court hearing, a GBB representative’s answer to why it did not anticipate these costs was that it is not “clairvoyant.”
We take exception to GBB’s statements that there have been additional cost overruns that GBB could not have been anticipated. We assume that GBB was appointed based on itssupposed expertise in the field, not on the hope that it would be clairvoyant. These additional costs, in many instances required by pre-existing laws and regulations, should have been anticipated. In one example, the anticipated cost of the Ordot Dump closure has ballooned from $40 million to $80 million.
No one can dispute that our statements have stayed focused on the numbers and the documents filed with the court. Thus, it is particularly regrettable that the receiver has felt the need to respond with personal attacks on individual government officials and accusations of “mud-slinging” to divert attention from the real issue. We respond to the major points of GBB’s most recent press release below.
GBB’s Claims vs. The Truth
CLAIM: “There was no multi-million dollar bend in the road. The change in the road design was to avoid a watershed and was not based on a bad map as alleged by the Governor’s Office.
TRUTH: The map used to build the road to Layon is attached. The property boundaries around which the road wraps did not exist when the road was built. The road design was based on the wrong map.
CLAIM: “There are no multi-million dollar salaries for Receiver personnel.”
TRUTH: The statement made by the Governor’s Office was cumulative, and GBB knows this. At least three GBB personnel bill between $30-$35,000 each, per month. That’s over a million dollars per year, cumulative, for five to six years.
CLAIM: “All travel expenses of the Receiver are managed within federal guidelines. There have been no extravagant dinners. There have been no luxury hotels or luxury condominiums.” Previously, in an April 1, 2014 statement, GBB summed up its financial performance as: “We have been subjected to two full audits by Guam’s Public Auditor and there have been no findings of double billing or improper expenses.”
TRUTH: The 2011 and 2012 OPA audits show that under GBB’s control and management, GSWA’s debt increased from $10 million to $20 million due to GBB’s failure to pay the bond proceeds as required. GSWA is operating in the red.
The OPA audits further reveal multiple procurement violations. Contracts were amended in violation of procurement laws from: (i) $100,000 to $900,000, (ii) $1.3 million to $8.2 million, and (iii) $857,000 to $2.5 million.
CLAIM: “The current rates provide sufficient money to pay for the operations of GSWA and the bonds are paid by Section 30 Revenue, so the Receiver does not need a rate increase. . . . The Governor is free to raise rates if he wants to but the Receiver will only do it when it is absolutely needed.”
TRUTH: The two highlighted sections are actually two separate statements: (i) GSWA is only making enough to pay for its operations, and (ii) GovGuam (not GSWA) is paying back the bonds from Section 30 revenues–because GSWA is not making enough to do so.
It should be news to everyone that GBB is saying it won’t be paying back any of the bond proceeds. GBB represented to the PUC in June 2012 that $45 a month in residential fees would be enough to pay back all bond proceeds. More recently, GBB represented that GSWA was only supposed to repay 75% of the bond proceeds. Now it will not be paying back anything.
CLAIM: “In nine reports since 2008 we have cautioned that the original estimate for the closure of the Ordot Dump was preliminary and would likely need to be revised.”
TRUTH: In October 8, 2010, GBB wrote a letter to GEDA estimating savings on the Layon Landfill portion of the project to be about $22 million, with further savings anticipated. GBB did caution that the price for the Ordot Dump was preliminary and may go up. But GBB also said: “Fortunately, the differences in our calculations for 2011 and 2012 are relatively close, giving the Government ample time to reallocate any bond funds not required for the closure of the Ordot Dump to other projects . . .” Even after any additional costs for the Ordot Dump closure, GBB was anticipating there would still be money left over from the bond for other government projects.
In GBB’s July 2012 quarterly report it was estimating a $30 million savings. It’s next quarterly report, filed ten months laterin May 2013, is the first time GBB announced that it ran out of money, but it didn’t reveal by how much until its November 2013 quarterly report. The price to close the Ordot Dump skyrocketed from $40 million to $80 million.
CLAIM: “While the closure of the Ordot Dump will cost more than originally expected, the savings we were able to achieve building the Layon Landfill will more than off-set the increased cost for the Ordot Dump.”
TRUTH: The supposed $27 million in “savings” on Layon doesn’t take into consideration the $21 million of “additional” projects necessary to Layon. These are projects for public safety. GBB accepts no responsibility for these projects only because it didn’t anticipate or budget for them.
CLAIM: “The Consent Decree Projects are not $63 million over budget. Additional projects added by the Government of Guam.”
TRUTH: The reason GBB concludes it is not over budget is because these “additional projects” were supposedly imposed by GovGuam after the fact. This includes the Route 4 safety enhancement, the Dero Road safety enhancements and the residential transfer station upgrades.
Each one of these “additional projects” are required by existing Guam law and regulation. The residential transfer station upgrades were made a condition of the Layon Landfill permit issued in 2009.
Would a person hiring a contractor to build a house for $400,000 be satisfied when the contractor presents a bill for $800,000, with the excuse that it didn’t budget for government permits or to comply with the building code? Yet, that is the excuse being used by GBB as it blames GovGuam for driving up the costs because it happens to have laws, regulations and requirements in place, primarily for public safety, that GBB either didn’t know anything about or it grossly miscalculated the cost of complying with these laws.
CLAIM: “Mr. Clark now describes the Receiver as being unconcerned about public safety on Route 4 when it was the Receiver who discovered the failure of DPW to correct all of the safety hazards on Route 4. We have never suggested that the Government of Guam not address these safety hazards. What we have said to the Court is that the Government of Guam should fund these critical needs directly instead of trying to run them through the Consent Decree. In any case, the safety hazards must be corrected.”
TRUTH: GBB previously described the Route 4 project as “necessary for public safety in general and for the safe operation of the Layon Landfill in particular.” And it asked the federal court issue an order to pay for this cost out of bond funds, which the court did.
After going over budget, the project was described by GBB in its most recent quarterly report as: “[an] added . . . cost that is not required by the Consent Decree, . . . the government can eliminate this added cost if it chooses to do so.”
GBB’s current statement that the safety hazards must be corrected does not match GBB’s earlier statement that the government has the option to eliminate this apparently unnecessary cost.
It is GBB’s position that projects necessary for public safety and for the safe operation of the Layon Landfill are not within the scope of the job GBB was hired to do.
CLAIM: “In 2013 alone, GIAA has paid Calvo & Clark $1.35 million for 6,317 in total billed hours. The rates range from $150 to $325 an hour.”
TRUTH: Arthur Clark left Calvo & Clark at the end of 2010 to join the current administration as Chief Policy Advisory. Clearly, GBB is aware of this, but apparently feels it is okay to misrepresent this fact by attributing the quote to another source.
Arthur Clark has no financial interest in his former law firm, now Calvo Fisher & Jacob, notwithstanding the impression GBB is trying to relay.