Memorandum
City of Lawrence
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TO: |
David L. Corliss, City Manager |
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FROM: |
Curbside Recycling Review Panel |
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DATE: |
January 22, 2013 |
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RE: |
Review of Curbside Recycling Proposals |
Background
The City’s Solid Waste Task Force report, presented to the City Commission on February 28, 2012, recommended a community recycling rate of 50% by volume by the year 2020. The City’s 2010 recycling rate was calculated at 38%. The City currently transports approximately 5,000 tons of solid waste per month to the Hamm landfill. One component to reaching recycling rate of 50% is to initiate a mandatory pay voluntary participation curb side recycling program. To evaluate this alternative, the City issued a Request for Proposal for a single stream curbside recycling collection service for residential dwellings on September 11, 2012. A total of four responses were received. Proposals were submitted by Waste Management, Deffenbaugh Industries, Hamm, and the City of Lawrence. The proposal from Hamm was only for a materials recovery facility (MRF) only. The City of Lawrence proposal was only for collection.
Requirements
The Request for Proposal identified numerous service requirements for a curb side recycling program. The major requirements are listed below:
o Provide recycling collection services for all residents living in single family dwellings
o Provide recycling collection services for all residents living in multi-family dwellings
o Provide the service on either a weekly or bi-weekly schedule
o Provide and maintain the recycling containers and equipment
o Perform services in accordance with all existing and future laws and regulations
o Assist in providing education material to the customers
o Provide sufficient reports to determine type and amount of materials being collected
o Develop a means of determining the market price of materials being sold
o Describe the method of determining and processing residuals
o Propose a method for calculating future price increases for collection services
The responders were also requested to describe how they would work with the current providers of curbside recycling and provide service to municipal buildings and public spaces.
Kansas Statutes 12-2035 and 12-2036 establish the procedures to follow when implementing a city-wide residential curbside recycling program. On June 12, 2012, the city adopted Resolution 6976 that announced the City’s intent to consider adoption of a residential recycling program. As part of the plan’s evaluation, the City must review ways of minimizing the displacement and economic impact on existing providers. The City subsequently met with current curbside recycling haulers to develop a plan. There are currently six providers of curbside recycling in Lawrence, five of which are considered to be small because they serve fewer than 350 customers. The five small haulers provided service to a total of 890 residential customers as of October 2012. State statutes require no organized collection service be implemented for at least 18 months after adoption of an Ordinance establishing city-wide service.
Proposals
The following is a summary of the responses to the City’s RFP.
Hamm
The proposal from Hamm was only for a MRF that would be located near the intersection of K-24 and K-32. The facility is currently leased by Hamm with a provision to purchase the property. If selected, Hamm would construct the MRF in time for Lawrence to implement its collection plan. The facility would be capable of processing all required materials. If the City desires to recycle glass, Hamm would provide an alternate proposal. The MRF would comply with the City’s reporting and auditing requirements. Hamm would be assisted by Greenstar (GSNA) to provide assistance in marketing the collected materials. Greenstar operates 16 MRF’s and manages 5,000 retail and commercial locations. Hamm would allow the current service providers to utilize its MRF. However, Hamm has stated that the proposal is contingent upon a minimum annual volume of 13,800 tons. This is significantly above the estimate of 5,000 tons per year. The processing fee would be $55 per ton based upon 13,800 tons of annual volume and would increase proportionately if a lower volume was delivered. The company would rebate the City 60% of the composite value of materials sold less the processing fee as long as the selling price was greater than $40 per ton.
Deffenbaugh Industries
Deffenbaugh currently provides curbside recycling service to approximately 4,250 Lawrence customers. The company’s proposal included complete pickup and processing services and a MRF only option. The company would meet the major requirements of the RFP. The proposal includes prices for both weekly and bi-weekly pickup. Deffenbaugh quoted pickup options for three, four, and five day per week collections and would match the trash pickup day. The pricing for multi-family customers would be the same as single family customers. The company would base future prices for its curbside service on increases in price indexes related to labor, fuel, vehicles, and consumer prices. The average of these indexes over the last five years is 3.58% as shown on Table 2.
Deffenbaugh would allow the current haulers to maintain their customers. The current haulers would bill the City for their services. The current haulers would be allowed to use their MRF and receive the same rebate rate as the City. The Deffenbaugh MRF is located approximately 32 miles from Lawrence in Kansas City, Kansas and processes 10,000 tons a month. The MRF handles all required materials and does not process glass. The City’s rebate would be based upon an index of the prices for the various recycled materials (composite value) and whether Deffenbaugh picked up the material or the City did. The rebate rate per ton would approximate 20-30% of the composite value for the likely range of prices to be received but would be capped at $10,000 per month for weekly pick up by Deffenbaugh. The rebate would not be capped if the City picked up the material or if the bi-weekly option was chosen for Deffenbaugh. No rebate would be received unless the composite value exceeded $50 per ton. Deffenbaugh estimates that they would recycle approximately 550 tons per month from Lawrence residential customers.
Their proposal contemplates that there would be no charge for municipal buildings. Services for public spaces would need to be negotiated. Deffenbaugh stated that information regarding financial condition, past litigation and regulatory actions would be available at a later date if requested.
Waste Management
Waste Management is one of the largest solid waste and recycling servicers in the country. The company’s proposal included complete pickup and processing services and a MRF only option. The company would meet the major requirements of the RFP. The proposal includes prices for both weekly and bi-weekly pickup. Waste Management also provided pricing for a bi-weekly pickup that would match the City’s current pickup days. The pricing for multi-family customers would be the same as single family customers. The company would limit future annual price increases in monthly pickup and processing fees to 3.0%.
The recently opened Waste Management MRF is located in Topeka. The MRF currently has a capacity of approximately 2,800 tons per month with the ability to expand to nearly 5,500 tons per month. The MRF would handle all required materials plus glass. The City’s rebate would be based upon an index of prices for the various recycled materials and would not differ if Waste Management picked up the materials or the City did. The rebate would be calculated by multiplying the composite value by 80% and subtracting a processing fee of $65 per ton. Waste Management estimates that approximately 400 tons per month of recycled material would be collected. This could increase to 490 tons per month with the addition of glass.
The proposal from Waste Management has a higher risk reward for the amount of rebate the City might receive. The MRF processing fee is higher, requiring that the blended value of the recyclables exceed $65 for any rebates to occur. However, the amount of rebate would be higher than the other proposals once the threshold is met. Waste Management’s proposal does not include any actions that would allow current haulers to continue to provide curbside recycling service. Waste Management would provide service at no charge to municipal buildings. The service for public spaces was not addressed. Waste Management has an optional service called Recycle Bank for an additional 50 cents per month. Recycle Bank works with local vendors to provide coupons and discounts for customers that recycle.
City of Lawrence
The City of Lawrence Public Works Department submitted a proposal for collection services only. The Department would contract with a MRF to process the materials collected under the terms identified in the proposals received. The Department presented both weekly and bi-weekly proposals. The Department meets the major requirements of the RFP. The current trash pickup schedule would be expanded to four days from the current three with recyclables collected on the same day. The department estimates that residential trash pickup would be $.66 less per month if the change is made to four day per week pickup. Yard waste would continue to be picked up on Mondays. The pricing for multi-family customers would be the same as single family customers. Future price increases would be determined by the governing body, but have averaged 4.15% over the last five years as shown in Table 2.
The Department’s cost proposal differs depending upon the distance from the selected MRF. The proposed Hamm MRF would be the closest and the Waste Management MRF the furthest from Lawrence. The proposal anticipates the hiring of one Administrative person and 0.5 to 4.0 drivers depending upon the distance from the MRF. The Department would purchase three to seven new fully automated side load refuse trucks to allow one person operation. The number of new vehicles would also depend upon the distance from the MRF. In addition, three current crews would be transferred from trash collection to picking up recyclables.
The Department also included an option with a transfer point to be located at either the Swan Building or the Farmland site. The transfer point option includes the purchase of compactor boxes, a trailer, skid steer, and an additional employee. An existing truck that hauls roll-offs would make two trips per week to the MRF. All capital costs are spread over seven years. Capital costs do not include any building or site improvement costs. A site plan would also be required. A permit from KDHE would not be required.
The Department proposes to continue to allow small haulers to service their current customers. However, no subsidy is included in the monthly price. Municipal buildings and public spaces would be serviced. Rebates would be received from the MRF for recycled materials to help offset the cost of service.
Pricing Analysis
The attached Table 1 (revised 01/22/13) provides a summary of the price proposals from the responders. The table provides the 2014 cost of single stream curbside pickup of the recyclables on a weekly or bi-weekly schedule, an estimate of the annual increase, the projected monthly cost at the end of the seven year contract period, and the 2014 monthly cost less projected rebates. The costs are based upon collecting 5,000 tons of recyclables annually with 33,500 accounts in 2014 and 35,500 accounts in 2021. However, the cost of the Hamm MRF option was based upon 13,800 tons per year at $55 per ton, but the rebate was based upon 5,000 tons per year. The calculation of annual increases is shown in Table 2 (revised 01/22/13) and is based upon an average of the past five years of the proposed index. The calculation of the blended value of the recyclables is also shown on Table 2 and was based upon the anticipated mix of materials and the average of the low and high prices of the materials over the last five years. The resulting average price of $118 per ton was used to calculate the expected rebate amount shown in Table 3 (revised 01/22/13). However, the monthly rebate amount if Deffenbaugh picked up the recyclables would be capped at $10,000 per month for weekly pick up by Deffenbaugh. The rebates were calculated excluding the cost to process the recyclables. The processing fee was added to the monthly amount charged to customers based upon a recycling volume of 5,000 tons per year.
Table 1 also shows the different Public Works Department and MRF combinations. Since the Hamm MRF would require a minimum of 13,800 tons of recyclables per year and the volume is only anticipated to be 5,000 tons per year, the Hamm MRF may not be a viable option from a cost perspective.
Decision Options
When evaluating the proposals from the various responders, the City Commission will need to choose from among several options. The City Commission will need to decide between weekly or bi-weekly pickup. The continuation of the current providers of recyclables will also need to be addressed. Finally, if the Public Works Department is selected to pick up the recyclables, a MRF will have to be chosen.
The Public Works Department recommends an initial schedule of a bi-weekly pickup of recyclables. It is anticipated that a 95 gallon cart would be required for bi-weekly service. Bi-weekly pickup would be a lower cost option for the customer, require fewer miles to be driven by refuse vehicles, and would result in a lower impact to the environment from vehicle emissions. Deffenbaugh customers currently receive weekly service. Weekly service would be more convenient for the customers since they won’t need to remember which week the pickup would occur. It could also encourage customers to recycle more.
There are currently six providers of curbside recycling in Lawrence. KSA 12-2036 requires that these providers must be allowed to continue their operations for at least eighteen months after adoption of an Ordinance establishing a residential recycling program. There is no legal requirement that the providers be allowed to continue to provide the service or receive any compensation. However, the City is required review how the recycling plan would minimize the displacement and economic impact on these providers. The Public Works Department calculates that the annual cost differential between the current small hauler rates for their 890 customers and the anticipated future rates would total approximately $135,000.
The City could a) allow these providers to continue to provide service to and bill their current customers, but not add new customers; b) have the city bill their customers the amount charged by the new provider, and pay the current providers their current rate; c) have the city bill their customers the amount charged by the new provider, and pay the current provider the new contract rate; d) terminate the services provided currently and compensate them for their economic loss; e) terminate the services provided currently and provide the displaced contractors preference for employment with the City if they meet the open position’s qualifications.
The City Commission may also want to categorize the current providers according to their size of operation. Small haulers would be more negatively impacted economically than larger providers. In addition, the City Commission may also want to reward those companies that were early providers of curbside recycling in Lawrence because of its environmental benefits.
If the current providers are allowed to continue to provide service, they may become contractual employees of the City. If so, the City could be held liable for their actions. The City Commission should consider requiring these providers to maintain appropriate insurance to protect the City from potential claims.
Hamm has stated that if their MRF option is not selected, the price of landfilling solid waste will increase by $1 per ton for every 5,000 ton per year decrease from the 2012 level. As a result, the cost of solid waste landfill disposal could increase by approximately $55,000 per year if the Hamm MRF is not selected. However, by not landfilling the 5,000 tons of recyclable material, the City will save $126,600 annually in landfill costs at current prices resulting in a net savings of $71,600 per year or approximately $.17 per residential account per month.
Action Requested
Based upon the Panel’s review of the proposals, it appears that the collection of recyclables by Deffenbaugh Industries and the City are extremely close for both the 4 day weekly and 4 day bi-weekly schedule. The City Commission will need to weigh not having as much control over the recycling activities if it is performed by a third party against the added risk of additional collection activities and either more driving time or the added cost of a transfer point if performed by the City. The City Commission can allocate all or a portion of the anticipated rebate to reduce the monthly charge. However, to make the proposals comparable, the analysis sets the amount of rebate retained by the City at $60,000 or $.15 per month. An additional $.17 per month could be used to further reduce monthly charges for residential solid waste or recycling services as a result of the net savings in landfill charges. Any retained revenue from rebates could be used to fund the future purchase of vehicles or for the construction of a transfer point. The City Commission is required to select a service provider for curbside recycling within one year of the adoption of Resolution 6976 or a new process must begin.