Adopt Resolution #20-225 Approving New Curbside Recycling Contract with ACE Solid Waste, Inc.

The City is in the final year of a three (3) year contract with ACE Solid Waste for curbside collection of recyclable materials.  The current contract will expire on December 31, 2020.  In March of this year, the Environmental Policy Board (EPB) reviewed the options available to the City regarding recycling service (negotiate an extension or new contract with ACE, prepare a Request for Proposal [RFP], or migrate to an open hauling system) and recommended that the City attempt to negotiate an extension or new contract with ACE Solid Waste.  Subsequently, the City Council reviewed this topic in May and directed Staff to proceed with negotiations with ACE Solid Waste on a new curbside recycling contract.   The purpose of this case is to consider approving a new curbside recycling contract with ACE Solid Waste, Inc.  

The City of Ramsey and ACE Solid Waste have been working together since 1990 to provide curbside recycling service for residential properties.  Over this span of time, there have been some major changes in recycling such as expansion of acceptable materials (and now, some reduction of acceptable materials), collection systems (went from dual sort to single sort), and pricing.  In 1990, the monthly rate per household was $1.15 per month.  In 2008, the contractually agreed upon price was $2.95 per household per month.  The monthly per unit fee has remained constant at $2.95 since that time (span of 12 years).

ACE has proposed a 7-year contract (2021 through 2027).  The proposed curbside recycling contract does include a per unit monthly fee increase beginning in 2021.  The proposed rate in 2021 and 2022 is $3.75, with the subsequent years having an automatic increase on the 1st of each year.  The proposed rates for a 7-year contract are outlined below:
 

Year	Rate	% Change
2021	$3.75	27.12%
2022	$3.75	0.00%
2023	$3.98	6.13%
2024	$4.10	3.02%
2025	$4.22	2.93%
2026	$4.34	2.84%
2027	$4.45	2.53%

 
ACE Solid Waste would prefer a 7-year contract.  However, If the City Council is more comfortable with a shorter duration contract, ACE has agreed to the following pricing structure for a 5-year contract:

5-year contract

Year	Rate	% Change
2021	$3.75	27.12%
2022	$3.86	2.93%
2023	$3.98	3.11%
2024	$4.10	3.02%
2025	$4.22	2.93%

 
Despite some significant changes in the recycling world over the past 5-10 years, Ramsey's per unit monthly fee has remained constant for over a decade.  Over the course of the past decade, there have been some fluctuations to the cost of collecting and processing recyclables.  In the early to mid 2010s, there was a significant jump in the price of fuel, which prompted many haulers to approach communities they were contractually servicing to request a per unit fee adjustment.  ACE never raised that question with the City of Ramsey and honored the per unit fee in the contract.

More recently, there has been significant disruption to the recycling commodities markets resulting from a policy shift by China.  Much of the United States' recyclable materials, especially plastics and mixed paper, had historically been shipped overseas to China.  However, beginning in 2018, China implemented their National Sword policy that included a ban on importing certain scrap materials and for other materials, an extremely stringent contamination rate (not to exceed 0.5%, which is the equivalent of about 10 pounds of contamination per 1 ton of material).  Essentially, this move created significant disruption to the recycling commodities markets, resulting in significant processing fees being applied to haulers at Material Recovery Facilities (MRFs).  Again, ACE did not approach the City to discuss any sort of per unit fee adjustment.

ACE Solid Waste has been providing dependable recycling service for the community for about 30 years.  ACE moved their operation to Ramsey in the early 2000s and continues to invest in the community with improvements to their site.  Most recently (2019/2020), this included an expansion of their transfer station facility, creating a more efficient operation (now that the Great River Energy Processing Plant is shut down).  As part of this expansion, ACE also included a 'convenience center' for residents to drop off additional recyclable materials (e.g. cardboard, newspaper, etc., that doesn't fit in a residents recycling cart).  This benefits residents by not having to 'store' excess recyclables nor drive to another community's recycling center.

As a reminder, by offering recycling through a contracted service provider, each household is billed for recycling on a quarterly basis through the City.  The hauler invoices the City monthly, they do not bill each residence directly for basic recycling service (they may potentially for walk up/drive up service, cleaning of carts, etc.).  Each household is billed by the City regardless of whether they choose to participate in the recycling program or not.  It is treated as another utility, similar to priority street lights and stormwater management.

Alternatives

Alternative 1: Approve the proposed Curbside Recycling Contract with ACE Solid Waste as drafted.  While the proposed contract does include a per unit price increase, that is not necessarily surprising given that the rate has been flat for 12 years.  Additionally, there have been some significant impacts to the recycling industry, mostly as a result of international policy shifts, resulting in greater costs for handling and processing of recyclable materials.  Staff does not oppose this alternative.

Alternative 2: Approve the proposed Curbside Recycling Contract with ACE Solid Waste for a shorter duration, such as a 5-year contract.  Yes, the proposed contract does include a per unit price increase, but that is not necessarily surprising given that the rate has been flat for 12 years.  Factoring in the changes in recycling in terms of materials accepted, increased processing fees, and large swings in the commodities markets, the proposed increase seems reasonable.  Staff supports this alternative.  

Alternative 3: Authorize a short term extension of the current Curbside Recycling Contract, at a mutually agreeable rate between the hauler and the City and direct Staff to proceed with preparing a Request for Proposal for recycling service beginning mid to late 2021 or beginning of 2022.  This could allow recycling service to continue uninterrupted in 2021 while also allowing the City Council to review multiple proposals (including one from ACE, assuming they choose to submit). Furthermore, ACE has stated their preference would be to find a mutually agreeable (and within reason) price structure for a new contract rather than a short term extension.  Staff does not support this alternative.

Alternative 4: Do not approve the proposed Curbside Recycling Contract and shift to an open hauling system.  This option removes the City from direct involvement with billing and allows residents to choose their recycling service provider (must be licensed by the City).  However, it also likely results in more trucks on residential streets if multiple haulers are collecting recyclables.  Additionally, this also creates some inconsistencies in terms of acceptable materials as each hauler may accept different items.  Finally, this would require more staff time in terms of obtaining monthly tonnage reports from multiple haulers (needed for reporting to Anoka County twice per year) as well as likely amendments to City Code (licensing requirements).  The EPB did not support moving to an open hauling system.
 

Staff is handling this case as part of its normal recycling duties, which is covered through SCORE funds.

Staff recommends approving a 5-year Curbside Recycling Contract with the pricing structure outlined above.  Whichever alternative the City Council prefers, the motion will need to specify the contract duration.  Staff will than update the contract with the specified term and applicable pricing structure.

Motion to adopt Resolution #20-225 approving a new curbside recycling contract with ACE Solid Waste, Inc.

[Note that the motion should be modified to identify the preferred contract duration and the price structure will then be added to the contract accordingly]