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Pgs. 118-125 Agenda No.   Pgs. 118-125    
City Council - Regular Meeting
Meeting Date: 11/06/2019  
Item Title:    Set 2020 Recycling Commodities Surcharge
Submitted For: Mori Struve
Financial Comments:

For 2018 and 2019 (Jan-Sept), the City's residential Recycling Program averaged 125 tons of recycling material each month. Historically, recycling had a positive value, meaning those tons were sold for a profit, which put money back into the Sanitation Fund reducing garbage costs for customers. Since September 2017, recycling commodities costs have been negative with a cost as high as $119 per ton.

The commodities surcharge established for 2019 was based on average costs from 2018 ($86.91/ton), however the costs for 2019 are averaging $112/ton and have been at or above $115/ton the past six months (April-Sept).

The monthly recycling commodities surcharge established in 2018 was $3.30/month as it had only 5-months to cover commodities costs in 2018. The 2019 rate, which was based on 2018 costs, was established at $1.21/month but will be insufficient to cover expenses based on current cost trends.

As discussed with Council at the August 26, 2019 Work Session, this action proposes to establish a “tipping point” for recycling commodities charges.

All Contracts:
Not Applicable
Federally funded contracts only:
Not Applicable
Construction contracts only:
Not Applicable
Brief Summary of Requested Action:
Establishes a “tipping point” (cost cap) for the 2020 Recycling Commodities Surcharge wherein if the per ton cost of recycling exceeds the cost to landfill the material, it will be landfilled. If the cost will be at or below landfill costs, it will be recycled.

Information
HISTORY:

This item was discussed with the Finance Committee on August 19, 2019 and with Council at the August 26, 2019 Work Session.

Recycling values for the City haven't been positive since July 2017. Prior to implementing the recycling commodities charge in 2018 (Ord. 2018-14), commodities costs were not felt directly by customers because the City’s Sanitation Fund absorbed the costs through garbage rates; however, with the collapse of the recycling commodities market in 2017, that approach was not sustainable. The 2018 surcharge ($3.30/month) went into effect on August 1, 2018, as rate payers had to recover costs from January 1 through July 31, as well as the costs from August 1 to December 31, 2018. For 2019, the costs were expected to be distributed out over a 12-month period instead of 5-months.

The monthly surcharge for 2019 (Ord. 2018-50) was calculated by estimating the cost for recycling each month, divided by the average number of recycling units. The calculation for 2019 was therefore: The average monthly tonnage (125 tons/month) * the average monthly cost per ton ($86.91/ton) / the average number of accounts (9,000 accounts) = $1.21 per month.

Contamination continues to be an issue contributing to high monthly costs, both in unit pricing and the tonnage collected. Reducing contamination at the local level will have little effect on unit pricing because the unit cost is driven by much larger market forces than Walla Walla controls. However, reducing the amount of contamination would reduce tonnage therein reducing monthly costs. It is with that interest that staff prepared a contamination reduction plan. This plan is in general alignment with that required by House Bill 1543 (see highlights below in the policy section).  Additionally, on August 8 staff submitted a grant funding request to the Department of Ecology to assist in funding activities identified in the proposed plan. Staff has been notified of award of this grant. It will provide $60,000 to be spent over a 2-year period in support of the Contamination Reduction Plan. However, for the foreseeable future, the cost of recycling commodities will continue to require a surcharge.

PROPOSED "TIPPING POINT” COST-CONTAINMENT STRATEGY
As discussed at the August 26 work session, this strategy proposes to put in-place a “tipping point” for Recycling Commodities costs for 2020 wherein if the per ton cost of recycling exceeds the cost to landfill the material, it will be landfilled. If the cost will be at or below landfill costs, it will be processed for recycling.

As of September, the per ton cost for recycling will be $119 and the cost to landfill $91.90 (2019 rate), a $27.10 per ton difference . If Council choses to adopt this tipping point cost-containment strategy, the following process/steps would occur:

  1. Staff will notify the Department of Ecology that due to “unreasonable cost impacts on the ratepayer” (see RCW 70.95.090 in the policy section below) the city will be implementing a “Tipping Point” Cost Containment Strategy effective January 1, 2020.
  2. Monthly, Pioneer Recycling (the city’s MRF) will notify the City of the monthly cost per ton for processing. If the monthly cost exceeds Sudbury Landfill's general refuse disposal cost/ton, BDI will be directed to take all curbside recycling directly to the Landfill and continue disposal in that manner until the Pioneer cost/ton for recyclables processing drops below the Landfill's rate.
POLICY ISSUES:
RCW 70.95.010 lists the State's goals and priorities for solid waste management.
RCW 70.95.090 stipulates recyclables must be collected from single and multi-family residences, unless Ecology approves an alternate program.
County and city comprehensive solid waste management plans—Contents.
(7) The waste reduction and recycling element shall include the following:
(b) Source separation strategies, including:
Programs for the collection of source separated materials from residences in urban and rural areas. In urban areas, these programs shall include collection of source separated recyclable materials from single and multiple-family residences, unless the department approves an alternative program, according to the criteria in the planning guidelines. Such criteria shall include: Anticipated recovery rates and levels of public participation, availability of environmentally sound disposal capacity, access to markets for recyclable materials, unreasonable cost impacts on the ratepayer over the six-year planning period, (emphasis added), utilization of environmentally sound waste reduction and recycling technologies, and other factors as appropriate. In rural areas, these programs shall include but not be limited to drop-off boxes, buy-back centers, or a combination of both, at each solid waste transfer, processing, or disposal site, or at locations convenient to the residents of the county. The drop-off boxes and buy-back centers may be owned or operated by public, nonprofit, or private persons.

Two key messages must be carried to customers:
1)  That the city is only doing the tipping point plan to contain customer costs; and
2)  Contamination must be reduced.

Applicable highlights of House Bill 1543 signed by the Governor in April (effective date of 7/1/2019):
  • The Recycling Development Center (Center) is created within the Department of Ecology (ECY) to further the development of markets and processing for recycled commodities and products.
  • The ECY must create and implement a statewide recycling contamination reduction and outreach plan based on best management practices for recycling. The plan must be developed with stakeholder input by July 1, 2020.The ECY must also provide technical assistance and guidance to help local jurisdictions understand contamination in their regional recycling, and to develop contamination reduction and outreach plans.
  • County and city solid waste plans must contain a contamination reduction and outreach plan (contamination plan).  Contamination plans must be added to local solid waste plans by amendment or when revising or updating a solid waste plan before July 1, 2021.
PLAN COMPLIANCE:
2014 WALLA WALLA COUNTY SOLID WASTE AND MODERATE RISK WASTE MANAGEMENT PLAN (Res. 2014-121)

Recycling Goals and Objectives
Section 3.1 Education and Outreach- Goals and Objectives
  • Increase recycling and recovery efforts and accomplishments.
  • Expand availability of opportunities of recycling and yard waste collection within the municipalities, unincorporated County area, and Urban Growth Area.
Section 3.3 Recycling- Recycling is the second tier in the hierarchy of solid waste management in the State of Washington.
Section 3.3.1.1 Goals and Objectives
  • Work toward reaching a recycling rate of 50% by 2023.
  • Continue to encourage and educate residents and businesses to compost and recycle.
  • Expand the availability of opportunities for recycling and yard waste collection within the municipalities, unincorporated County area, and Urban Growth Area.
GREENHOUSE GAS POLICY:
Continue to promote and expand recycling programs ... improved management of waste handling, reductions in waste generation, and expansion of waste diversion programs.
ALTERNATIVES:
  1. Increase the 2020 commodities surcharge to reflect 2019 costs. Based on costs over the past six months that rate would be:  123 tons/month (average monthly tonnage) * $116.50/ton (average monthly cost per ton) / 9,000 accounts (average number of accounts) = $1.60 per month – a $0.39 increase per month over the 2019 rate.
  2. Pursue suspension of curbside recycling.
  3. Implement the Tipping Point Cost-Containment Strategy as described above (or at some rate other than the per ton tip fee at Sudbury).
It is recommended that contamination reduction efforts occur with all alternatives that maintain the recycling program.
STAFF RECOMMENDATION:

Adopt an ordinance setting the recycling commodities surcharge at $1.29 per month and a policy that sends recycling to the Sudbury Landfill when the monthly recycling commodities cost is expected to exceed Sudbury’s regular per ton tip fee ($94.10/ton for 2020).

Commodities charge calculated as follows:
123 tons/month (average monthly tonnage) * $94.10/ton (2020 Sudbury Landfill per ton rate) / 9,000 accounts (average number of accounts) = $1.29 per month – a $0.08 increase per month over the 2019 rate.

CITY MANAGER COMMENTS:
Approved for City Council consideration.

Attachments
Ord 25.Recycling Surcharge

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