What Have You Done for the Community?

Texas Disposal Systems is determined to make sure every government official and citizen of central and south central Texas can answer that question.

Fifteen years ago, Texas Disposal Systems (TDS), then a seven-year upstart in the refuse business, bid on a waste hauling contract for a downtown section of its hometown, the city of Austin, Texas. Competition proved tough, as TDS fought Waste Management Inc. (WMI), Houston, for the city's franchise business.

TDS had spent time discussing needs with the city staff and designing a bid to fit those needs. Waste Management, TDS says, lobbied the political officials, including the mayor.

Of course, lobbying generally doesn't mean anything in this situation. Low bids usually win.

And when the time came to open the bids, TDS amazingly had offered its services for $1 less per month than Waste Management - on a contract worth approximately $100,000 per year.

Bob Gregory, CEO of TDS, rejoiced in his victory.

Or was it?

The city's waste management staff recommended accepting the lower TDS bid.

The mayor, however, favored the large provider, Waste Management. In the presentation to the city council, the mayor argued that a $1 per month difference in the bids amounted to a virtual tie. Why not award the contract to the company that had been servicing the account and had a nationwide reputation? In closing, the mayor insisted that the choice between the two was clear. After all, he asked: Who is Texas Disposal Systems, and what has this company done for the community?

"I was floored," Gregory recalls. "We had done a lot for the community. We were a local company contributing to the local economy. We had been involved in numerous community events. But the mayor acted as if he didn't know us."

Despite the mayor's views, the city remained true to its low bid specifications. After a debate that could have altered TDS' fortunes, the city council voted to award the contract to TDS on the basis of the company's $1 per month lower bid margin.

Gregory still took the incident to heart. "When this happened, the light when on," he says. "I decided that no decision-maker would ever have to ask again who we were. From now on, everyone would know who TDS is, and what the company has done for the community."

Humble Beginnings Bob Gregory and his brother Jim grew up working in the family's metal scrap yard business in the west Texas town of San Angelo.

As a young man, Bob attended the University of Texas in Austin (UT), paying his way in part by working nights and some weekends in an Austin scrap yard. In 1971, Gregory began his own scrap metal business.

In 1974, Gregory graduated from UT with a degree in business and married his high school sweetheart. He borrowed $120,000, bought a truck, leased a larger warehouse and installed machinery designed to enlarge his ability to recover precious metals from old telephone and computer equipment. He called his company Texas Alloys, which he continues to operate today as part of his scrap metal operation in San Angelo, Texas.

After a few years in the metal recovery business, Gregory decided to diversify. Rising and falling international metal markets led to unpredictable revenues, and Gregory wanted a way to hedge against down years.

He investigated the garbage business by attending National Solid Wastes Management Association (NSWMA) conventions in 1976 and 1977. And by November 1977, Gregory began hauling garbage. The business looked like it could be profitable, and he asked his brother to join him as a co-owner. Jim agreed and moved to Austin.

Bob and Jim incorporated the company as Texas Disposal Systems Inc. in January 1978.

In those early years, the company grew slowly, one small account at a time, Bob Gregory says. By 1985, he was bidding on the downtown hauling contract for the city of Austin.

Bob Gregory's experience with that bid taught him an important lesson: Immerse yourself in the affairs of the local communities in your service area, and let them know how they could be better-off with you as a service provider. He paid particular attention to the city of Austin, the state capital, an intellectual center for environmentalism and the home of the University of Texas.

By 1986, Gregory's attention to local affairs yielded an ominous fact: The city's landfill was approaching capacity.

Gregory watched as city planners attempted to permit a new landfill. Opposition developed and the city failed. Next, the city set out to develop a waste-to-energy plant to handle its disposal needs. After spending $24 million, the city, once again, failed to satisfy citizen and environmental group concerns, and the project was stopped.

"At that point, I said one way or another the city of Austin will soon be out of the landfill business," Gregory recalls.

If that happened, TDS would have had to rely on landfills operated by Waste Management Inc. and Browning-Ferris Industries Inc. (BFI). "I knew that if we were going to stay in the hauling business, we would have to permit a landfill," Gregory says. "I set out to do that with two images in my mind. First: the mayor of Austin wondering who TDS was and what it had ever done for the community. And second: the city's expensive failures to permit a landfill and build a waste-to-energy plant."

Gregory determined that TDS had to permit a landfill, and he knew that he needed the full support of the city government, the environmental community and the greater community.

Easier said than done.

Permitting a Landfill The process turned into a two-and-a-half year battle between the nation's two largest haulers and TDS.

Texas A&M University, located 150 miles away, also weighed in against TDS on the basis of a 10 percent ownership interest in a large piece of property located adjacent to the proposed TDS landfill, and one of their board of regents' members owning the land and a royalty interest in the local BFI landfill.

Gregory turned to the city and the environmental community for support. TDS submitted its permit application in 1988 and sought the support of the city of Austin.

By the time TDS had begun its permit hearing process in 1989, the Austin City Council had unanimously voted twice to support TDS. Additionally, the Austin League of Women Voters and Austin Sierra Club supported TDS, as had five other local environmental groups.

Why? Communities, governments, and environmental groups, it seems, do not automatically oppose landfills. They oppose odor, water contamination, litter, eyesores and practices that may endanger the environment where people live. However, Gregory had envisioned a landfill concept around the idea of contributing more than trash disposal to the community.

Gregory's landfill would occupy 342 acres in the midst of a current 984-acre track of land. Instead of chain-link fences, the landfill would be enclosed with a game fence similar to those used on exotic game ranches.

"We always wanted a ranch, but never could afford one," Gregory says. "It occurred to me that the facility might provide pastures for steers and other animals of interest to our neighbors."

Inside the facility, customers would drive on paved roads beside landscaped berms. Every day, TDS teams would clean the onsite roads as well as pick up litter on five miles of highway frontage leading to the site.

The facility also would offer a recycling and resale center. Dropped off recyclables would be separated into usable and recyclable items. The immediately usable items would be transferred to an adjacent pavilion and resold to the community. Recyclables would be transferred to other facilities. The center would accept everything including bicycles, computers, antiques and furniture.

In the end, the Gregory brothers' landfill was sited, but instead of only housing steers, the "ranch" has grown to more than 1,000 animals, including 25 different species of wildlife such as cattle, buffalo, deer, antelope, impala, gazelle, ostriches, emus and zebras. And, the Austin Chronicle has described the recycling and resale center as "the city's best unadvertised garage sale."

One factor that helped sway environmental groups to TDS' side during the permitting debates was that Gregory planned to build a composting facility adjacent to the landfill.

"Composting is a unique part of our landfill business, not a huge part," Gregory says, but "it's unusual because of the kinds of wastes we can take through it. We accept liquids - beer, wine, whiskey, sports drinks, milk, and so on - and food wastes. In addition, we take documents from a large federal agency, shred them and compost them when the bales of shredded paper can't be sold for recycling." The ink is soy based and biodegradable, Gregory says, adding that "last year, we also composted approximately a half million old telephone directories."

All of this, of course, is added to yard wastes.

Fortunately, TDS' composting business, which now is managed by Jim Doersam, professional engineer, is profitable - despite lower than average local disposal costs. Landfill tipping fees in the region run between $14 per ton and $24 per ton, which makes landfilling yard wastes and other organic refuse generally more attractive than composting.

Gregory committed to composting during the permitting process to address some of the environmental groups' concerns, but he assumed the operation would lose money for a long period of time. Further investigation, however, proved Gregory's initial analysis wrong.

"We decided to see what would happen if we got creative with composting," he says. "We have developed a process that mixes various feedstocks to produce a premium grade compost. It's so costly to produce that you wouldn't think it's worth the trouble, but it enables us to sell it at a profit. The mixture of products accepted and the marketing idea has made it worthwhile."

Gambling it All The 30-month landfill permitting process eventually cost TDS $1.5 million on attorneys, engineering plans, landfill designs and redesigns, and 40 days of public hearings, each of which cost up to $7,000 per day in expenses, including attorney and other professional fees.

"It was almost everything we had," Gregory says. "We literally bet the company on the permitting of the landfill."

The gamble paid off. TDS received a permit, the first ever issued in Texas for a landfill offering a combination of disposal, recycling and composting at one site, Gregory says. He also incorporated a separate company to operate the landfill, which opened in February 1991.

But once the landfill opened, Gregory had to find customers interested in putting their trash in it. Original customers supplied only about 300 tons per day.

Gregory began marketing, and by1993, his efforts began to succeed. The city of San Antonio agreed to send approximately one-third of its waste to TDS' facility for five years. In 1995, San Antonio agreed on terms for a 30-year contract that would send a minimum of 50,000 tons per year to the facility. In 1998, another revision privatized the operation of the San Antonio transfer station under TDS' management and upped the annual landfill tonnage guarantee to 100,000.

Additionally, in October 1998, the city of Georgetown hopped on board, awarding TDS a 10-year franchise to collect its trash. This agreement followed a request for proposals (RFP), under which Georgetown sought not necessarily the lowest bidder but the best long-term partner.

Six companies responded, with three progressing to the final stage. Eventually TDS won the opportunity to negotiate a 10-year agreement, despite being priced 17 percent higher than the lowest bidder.

"We have worked for more than 20 years to separate ourselves from our competitors by holding ourselves to a higher level of commitment to service,""Gregory says, commenting on the Georgetown contract. "We hope that the rest of Texas will take note as we successfully maintain this partnership by valuing integrity and quality of service and not just price."

Indeed, the city of Austin took notice. In February 1999, Austin awarded TDS a contract to dispose of approximately 33 percent of the its waste. The other two-thirds of the business went to one of the large national waste management firms.

During the more than two-year contracting process, one of two TDS competitors claimed that certain design features of the TDS landfill were in- adequate. Local environmentalists defended TDS and discovered that the landfill operated by the competitor was situated on land that once housed a hazardous material disposal site - which had been capped before the competitor bought the site.

While no one accused the competitor of any wrongdoing, the discovery led Austin to review all landfills involved in the contract. That landfill was disqualified from being considered. This May, the Austin city council voted unanimously to ship at least 66 percent of the city's waste to the TDS landfill for the next 30 years, with 33 percent going to the other competitor for the remainder of its five-year contract. The city currently landfills approximately 136,000 tons of its solid waste per year.

It is safe to say that TDS has become one of the nation's most successful private waste contractors, especially impressive in the bruising, competitive Texas waste management industry. Having reached the point where cities and towns across the state know who TDS is and what the company has done for the communities it serves, it is doubtful that Gregory will ever let them forget, either.

In the past five years, TDS has earned more than its share of awards from private and public organizations. Here is a sampling:

- 1999: Keep Austin Beautiful, Dennis Hobbs Individual Achievement Award

- 1998: "Best Award," Businesses for an Environmentally Sustainable Tomorrow Innovation Award, Waste Management Category, presented by the Greater Austin Chamber of Commerce, The city of Austin, and the Austin Business Journal.

- 1998: City of Austin Environmental Awareness Award, Private Enterprise Award, presented by the Resource Management Commission, the Solid Waste Advisory Commission and the Environmental Board of the City of Austin, 1998.

- 1997: Outstanding Business Leadership, Keep Austin Beautiful.

- 1997: First Place, Recycling & Composting, Texas Organic Products, Recycling Coalition of Texas

- 1996: Second Place (national award), Business/Industry Category, Keep America Beautiful

- 1996: First Place in the State, Best Environmental Commitment by Small, Locally Owned Business, Keep Texas Beautiful.

Owners: Bob and Jim Gregory

Company President and COO: Eddie Dick

Employees: 235

Service area: Central and South Central Texas.

Headquarters: Austin, Texas. Facilities include corporate offices; 341-acre permitted landfill with 40-plus years of capacity remaining; brush grinding and composting operations; and 600-acre buffer space ranch featuring an entertainment facility with a pavilion, sporting clays, a log cabin and 25 different species of animals.

Satellite facilities: Transfer station operation and collection company in San Antonio, Texas; transfer station in Travis County, Texas; collection company in Georgetown, Texas.

Largest contracts: 30-year agreements with the cities of Austin and San Antonio for landfill disposal and other operations.

Services: Collects and disposes of municipal, institutional, residential, commercial, construction and demolition, and industrial wastes. Collects recyclables and transports to area MRFs. Markets high-grade compost and the rental of portable storage units. Recycles and resells scrap metals and white goods.

The landfill received 552,000 tons of waste for disposal in 1999 and composted more than 15,000 tons of waste materials.

Approximate breakdown of revenues: 55 percent garbage collection; 40 percent landfilling; 5 percent composting and recycling.

Revenues: Texas Disposal System executives prefer not to disclose revenues. Dun and Bradstreet estimates that company sales total approximate $50 million per year. TDS was ranked No. 24 on this year's Waste Age 100 ranking of privately held companies.

Fleet: Largely Mack trucks with McNeilus bodies. Some Fords, including front loaders, side loaders, roll-offs and residential collection equipment. Transfer truck/trailers are Mack chassis with East trailers.

Containers: Front-loading, 2 to 10 cubic yards (cu. yds.), including compactors; rear-loading from 1.5 to 6 cu. yds.; 96-gallon residential carts; Wastequip-Mayfab roll-offs from 15 to 42 cu. yds., including compactors; side-loading from 3 to 4 cu. yds.; and 8-foot by 20-foot portable storage units. Containers/carts are manufactured by Wastequip - Mayfab and Rehrig Pacific. Compactors are by Marathon Equipment.

Area Tipping Fees: $14 per ton to $24 per ton.

Not many people want to live next door to a landfill. But the design and execution of Austin, Texas-based Texas Disposal Systems' landfill makes it altogether a different animal. Take one of the neighbors living directly adjacent to the site.

When this fellow began to organize a family reunion at the beginning of this year, he designed the family's activities around tours of the TDS landfill, including the wildlife preserve and the resale center.

More prominent neighbors also enjoy spending time at the TDS Austin landfill. During the 1999 legislative session, about one-third of the members of the Texas legislature attended meetings or parties at the landfill and ranch facilities. Three state senate committees also held their end-of-session parties at the site.