Phoenix Mayor Phil Gordon gave advice to Veolia Transportation on how to play hardball with the city. And it paid off.
Cash-strapped Phoenix agreed to pay $27.5 million over the next five years to Veolia, the company that operates city buses and has Elissa Mullany — Gordon's girlfriend — on its payroll.
The mayor stepped into the fray from late March to early April, when the company wasn't getting its way during contract negotiations with the city. Gordon advised Veolia executives to tell city transit officials that it would walk away from its city bus contract, a Veolia insider tells New Times.
That's exactly what the company did, prompting Phoenix's city manager to fly to Chicago and make nearly $30 million worth of concessions to the company, a city source also says.
Gordon's actions raise questions about whose interests he was putting first: The city's? The company's? His girlfriend's?
Gordon wasn't supposed to be involved in discussions about Veolia; he already had declared publicly a conflict of interest regarding the company — which makes sense, given that his girlfriend helped the transportation firm win its contract.
City ethics policy dictates that an elected official cannot participate in city business in "any manner" once he's declared a conflict.
When the public was watching, Gordon abstained from voting and discussing Veolia. But behind the scenes, he was engaged.
Several council members confirmed that Gordon participated during City Council closed-door executive sessions when Veolia was discussed.
The city and Veolia were at odds because company executives wanted Phoenix transit officials to pay Veolia employees' pensions, which had become under-funded because of economic downturns, and to pay for unused sick leave.
At the time, Veolia was operating city buses for Phoenix under a contract set to expire on June 30. The unresolved sick leave and pension issues were tied up with the contract. Phoenix already had awarded Veolia a new contract to continue operating city buses starting July 1.
It was supposed to be a seamless transition from one contract to the other.
Since they had dual contracts on the table, Veolia executives and city officials agreed that the pension and sick-leave issues from the old contract wouldn't interfere with the new bus contract.
But Veolia negotiators weren't getting the city to budge on those issues, so they turned to Billy Shields, the company's lobbyist and a longtime friend of Gordon's.
Erica Swerdlow, spokeswoman for Veolia Transportation, denies that Gordon spoke directly to Veolia executives but concedes that the mayor suggested to the company how contract negotiations should be handled.
"He did indicate to our lobbyist, Billy Shields, that he had removed himself from any involvement in negotiations over the old contract but suggested that in order to get the matter resolved with the city, which was in everyone's interest, we needed to get it elevated to the city manager level," Swerdlow says.
Apparently, Veolia's threatening to walk away from a city bus contract — leaving Phoenix with only two months of guaranteed bus service and the immediate need to find another transportation company — was an effective way of getting the city manager's attention.
After Gordon made his suggestion, the company told the city it was pulling out.
David Leibowitz, Gordon's hired spokesman, also confirmed the mayor's involvement but said Gordon did nothing wrong, much less illegal. He described Gordon's role as "minimal."
The mayor refused to speak directly to New Times on any matter related to this story, at one point insisting that all questions be submitted in writing to Leibowitz.
In a statement to New Times, Leibowitz says: "What the mayor did do in reference to Veolia is affirm their belief that, in order to resolve the matter, they should elevate the negotiation conversation up the city's chain of command, to the city manager. The mayor's thinking was, getting this resolved was in everyone's best interests and that the time had come to 'go upstairs,' so to speak."
After Veolia fired off its written notice rejecting the five-year, $386 million contract Phoenix had awarded the company, Phoenix transit officials started negotiating with First Transit, the company that placed second in the city bus-contract bid.
That didn't go anywhere.
City Manager David Cavazos flew to Chicago with several employees to strike a deal with Veolia. To settle the old contract, Cavazos made $27.5 million worth of concessions to Veolia for the pension and sick-leave payments and agreed not to recoup $681,000 that the Phoenix Public Transit Department already had mistakenly paid for Veolia employees' sick days between 2000 and 2009. Despite the fact that sick-leave payments were Veolia's responsibility — not the city's — nobody in the city's transit department had noticed that the firm was billing Phoenix for the cost for almost nine years.
Still, the company wanted more — so city officials also rewrote part of the new contract.