Fremont City Council Meeting: 02/21/23 07:00 PM
3300 Capitol Avenue Div/Dept: Environmental Services
Fremont, CA 94538 Category: Agreements and Contracts
SCHEDULED
Sponsors:
COUNCIL STAFF REPORT (ID # 4802) DOC ID: 4802
Updated: 2/17/2023 8:32 AM by Alberto Quintanilla Page 1
SOLID WASTE TRANSFER AND RECYCLING PROCESSING CONTRACT
AMENDMENT - Authorize staff to negotiate an amended and restated agreement with BLT Enterprises for Curbside Recycling Processing Services to Upgrade the Processing Equipment, Extend and Align the Contract Term with the Agreement for Solid Waste Transfer Services and Combine the Two Contracts into a Single Restated Agreement
Contact Persons:
Name: Kathleen Cote-Guarnieri Suzanne Wolf
Title: Environmental Services Manager Community Services Director Div/Dept: Environmental Services Community Services
Phone: 510-494-4583 510-494-4329
E-Mail: [email protected] [email protected]
Executive Summary: The City contracts with BLT Enterprises for curbside processing and solid waste transfer services conducted at the Fremont Recycling and Transfer Station.
These services are provided under two separate agreements, the Curbside Processing Agreement expiring May 31, 2026 and the Solid Waste Transfer Agreement expiring June 30, 2037.
The curbside processing equipment was placed into service June 2006 and is reaching the end of its useful life. BLT Enterprises has proposed upgrading the equipment to incorporate current technology that will improve the separation of materials and increase diversion of material from the landfill. Due to the substantial capital investment required ($5-$6 million), implementation would require a minimum 10-year contract extension in order to amortize the equipment costs.
Staff’s assessment is that upgrading the processing equipment and extending the Curbside Processing Agreement could offer several benefits for the City and its rate payers, including improved recycling outcomes, reduced landfill costs, and predictable processing costs for an extended period. It would retain the facility’s operating efficiencies by maintaining incoming volumes and support a local facility and its work force. Using a curbside processing facility within Fremont reduces the travel time needed to deliver material for processing. This substantially improves the efficiency of the collection routes and reduces the recycling collection costs that are borne by rate payers.
Staff is recommending aligning the contract terms for curbside processing and solid waste transfer services into a single restated merged agreement expiring June 30, 2037. A single agreement would be more efficient to administer and eliminate the potential for conflicting language between the two agreements. It would provide an opportunity to update language for both curbside and solid waste transfers services to reflect current regulatory and market conditions and remove obsolete provisions.
Staff is recommending the City Council authorize staff to negotiate a merged restated agreement with BLT Enterprises for curbside processing and solid waste transfer services through June 30, 2037. Staff anticipates returning to the City Council in fall 2023 for Council Staff Report (ID # 4802) Meeting of February 21, 2023 Updated: 2/17/2023 8:32 AM by Alberto Quintanilla Page 2 approval of the agreement. There is no General Fund impact as any costs associated with these services are funded by rate payer fees.
BACKGROUND: The City has four solid waste agreements, including waste collection, solid waste transfer services, recycling processing and landfill disposal, which are all elements of providing solid waste services to Fremont residents and businesses. Collection is provided by Republic Services, landfill disposal is provided by Waste Management at Altamont Landfill and solid waste transfer and recycling processing services are provided by BLT Enterprises at the Fremont Recycling and Transfer Station (Transfer Station). Fees for these various solid waste services are calculated biennially in accordance with each contract's terms. The various solid waste fees are all components of the solid waste collection rates set once every two years by the Council and charged to ratepayers. The current rates are in effect through December 31, 2023.
Prior to development of the Fremont Recycling and Transfer Station, solid waste was direct hauled in collection vehicles for disposal at Tri-Cities Recycling and Disposal Facility, a landfill located at the terminus of Auto Mall Parkway. In anticipation of the landfill reaching capacity, the City entered into a facility development and operating agreement with BLT Enterprises to meet its long-term waste disposal needs. This Solid Waste Transfer Agreement (Agreement between the City of Fremont and BLT Enterprises of Fremont, Inc for Recyclable Diversion and Transfer Services) was executed in April 2004. Due to delays with the landfill closure date, solid waste delivery to the Fremont Recycling and Transfer Station did not commence until July 1, 2007. This delivery date triggered the 30-year contract term with an expiration date of June 30, 2037. The Solid Waste Transfer Agreement contains numerous sections related to the facility development and readiness and City obligations to transition delivery of waste, which are now obsolete.
Prior to development of the Transfer Station, the City direct hauled residential curbside recycling and organic material to Republic Services’ Newby Island Material Recovery Facility located on the Milpitas/San Jose border. The City conducted a procurement process when the City’s curbside processing contract with Republic Services expired and chose to transition curbside recycling processing to the Transfer Station. At the time, curbside organics were co-collected in split body trucks along with recycling and therefore organic material had to be off loaded at the Transfer Station as well. Republic Services has since transitioned to using single body trucks.
The Transfer Station does not have the capability to compost organic material, so it is consolidated and transported to Newby Island for composting. These services are covered under the Curbside Processing Agreement (Agreement between the City of Fremont and BLT Enterprises of Fremont, Inc for Curbside Recyclable Materials and Curbside Organic Waste Services). The contract term was established for a 20-year period in consideration of the expected life of the processing equipment. Curbside material delivery began June 1, 2006, approximately 1 year prior to the Transfer Station accepting solid waste. This delivery date triggered an expiration date of May 31, 2026. Due to the different contract terms, the City elected to execute a separate Curbside Processing Agreement rather than incorporating these services into the Solid Waste Transfer Agreement.
The Curbside Processing Agreement has been amended by a series of short-term compensation agreements (amendments 3, 4, 5 and 6) to address extraordinary impacts on the economics of processing the City’s curbside recycling material. These extraordinary Council Staff Report (ID # 4802) Meeting of February 21, 2023 Updated: 2/17/2023 8:32 AM by Alberto Quintanilla Page 3 conditions began with policy changes enacted by the Chinese government (known as National Sword), which increased recycling processing costs while reducing the market value of processed material. Amendment 6 was effective January 1, 2022 and the compensation terms are in effect through May 31, 2026, the duration of the Curbside Processing Agreement. These terms provide the following compensation to BLT Enterprises with biennial adjustments incorporated into the rate setting calculations and fully covered by the existing solid waste collection rates:
• Incoming Processing Fee
o $78.00 per incoming ton of Fremont curbside recycling o CPI adjustment
• Residue Landfill Payment
o $55.00 per ton of landfill bound residue
o Blended index adjustment consisting of 65% of the landfill tip fee increase and 35% of the CPI index.
• Mixed Paper Processing Fee
o $67.00 per mixed paper ton
o Adjustment based upon the average material revenue change per ton
• Curbside Extraordinary Adjustment Fee
o $12.18 per incoming ton of Fremont curbside recycling o Related to an extraordinary adjustment for living wage beginning January 2014
o CPI adjustment
• Residential Organics Transfer fee
o $30.67 per incoming ton of Fremont residential organics o CPI adjustment
The City receives a Curbside Offset fee of $2.86 for every ton on incoming curbside material that is delivered from outside of Fremont, Newark, or Union City. These are short-term sporadic occurrences and generally take place when another processing facility is temporarily unable to process its material due to equipment issues, facility maintenance closure, or an unexpected occurrence or emergency. This fee is adjusted by the CPI as par t of biennial rate setting.
DISCUSSION/ANALYSIS: The existing curbside processing equipment is reaching the end of its useful life. BLT Enterprises has proposed upgrading the processing equipment to incorporate optical sorting and other technology enhancements. This is expected to significantly improve processing efficiency, increase the material that can be diverted, and reduce the amount of material that is landfilled as processing residue. Due to the significant capital expense required ($5-$6 million), a minimum 10-year contract extension would be needed in order to amortize the equipment cost. BLT has also proposed retaining all the existing compensation terms and biennial adjustment formulas. In addition, BLT has indicated it is pursuing a long-term curbside processing contract from a neighboring jurisdiction which could more than double the curbside material volumes processed.
Council Staff Report (ID # 4802) Meeting of February 21, 2023 Updated: 2/17/2023 8:32 AM by Alberto Quintanilla Page 4 Staff’s assessment is that upgrading the processing equipment and extending the Curbside Processing Agreement could offer several benefits for the City and its rate payers, including improved recycling outcomes, reduced landfill costs, and predictable processing costs for an extended period. It would retain the facility’s operating efficiencies by maintaining incoming volumes and support a local facility and its work force. Using a curbside processing facility within Fremont reduces the travel time needed to deliver material to an alternate facility for processing. This substantially improves the efficiency of the collection routes and reduces the recycling collection costs that are borne by rate payers. It is staff’s assessment however, that there are opportunities for improvement in the proposed contract terms.
The Solid Waste Transfer Agreement has number of provisions related to facility development and waste acceptance that are obsolete. The Agreement has six amendments that could be streamlined and consolidated. A single agreement for solid waste transfer and curbside processing services would be more efficient to administer and eliminate the potential for conflicting language between two agreements.
Staff is seeking authorization to negotiate an amended and restated agreement with BLT Enterprises for curbside recycling processing services to upgrade the processing equipment, extend and align the contract term with the Agreement for Solid Waste Transfer Services and combine the two contracts into a single restated agreement. Negotiations would include, but would not be limited to, the following items:
• Pricing for curbside processing;
• Continuation and/or pricing organic transfer services; • Performance/processing standards;
• Fremont benefit for additional long term incoming curbside material stream; • Construction & Demolition Debris processing;
• Removal of obsolete provisions;
• Assess the curbside extraordinary adjustment fee; and • Start date for new terms.
FISCAL IMPACT: Rate payer impacts are expected to be minimal because the extended contract term for curbside processing will be sufficient to amortize equipment upgrade costs. Staff anticipates that the existing solid waste collection rate structure and biennial adjustment procedure will continue to be adequate to fund all necessary solid waste and recycling collection, processing, and disposal costs. There is no General Fund impact as any costs associated with these services are funded by rate payer fees.
ENVIRONMENTAL REVIEW: Authorizing an amendment to the Recycling and Yardwaste Transfer Agreement as described this staff report is exempt from and not subject to review under the California Environmental Quality Act (CEQA) because, without limitation, it is not a “project” as defined in CEQA Guidelines Section 15378(b)(5) and as it can be seen with certainty that there is no possibility that the activity may have a significant effect on the environment per CEQA Guidelines Section 15061(b)(3), each as a separate and independent basis for CEQA compliance.
ATTACHMENTS: None.
Council Staff Report (ID # 4802) Meeting of February 21, 2023 Updated: 2/17/2023 8:32 AM by Alberto Quintanilla Page 5
RECOMMENDATION: Authorize staff to negotiate an amended and restated agreement with BLT Enterprises for curbside recycling processing services to upgrade the processing equipment, extend and align the contract term with the Agreement for Solid Waste Transfer Services and combine the two contracts into a single restated agreement.