City Council
Report
City Council Meeting: November 12, 2019
Agenda Item: 3.K
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To: Mayor and City Council
From: Susan Cline, Director, Public Works, Resource Recovery & Recycling Subject: Authorization of third Contract Modification with Southern California Disposal for Recyclable Materials Processing
Recommended Action
Staff recommends that the City Council:
1. Authorize the City Manager to negotiate and execute a third modification to contractual services agreement #9011 (CCS) in the amount of $360,000 with Southern California Disposal Company, a California-based company, for recyclable materials transferring services for the Public Works Department. This will result in a 17-year amended agreement with a new total amount not to exceed $37,260,000, with future year funding contingent on Council budget approval.
2. Authorize budget changes as outlined in the Financial Impacts and Budget Actions section of this report.
Summary
The City utilizes the service of Southern California Disposal to transfer waste materials to various disposal or processing facilities. At its September 24, 2019 meeting, the City Council approved a second contract modification with Southern California Disposal in the amount of $900,000 to cover the cost of interim recyclable materials transferring services for the 18-month period of July 2019 through December 2020. After staff submitted the September 24th staff report, Southern California Disposal contacted the City and requested a rate increase citing an underestimation of the cost of transferring recyclable materials – a service the company has not provided to the City in the past.
Staff recommends the Council approve a third modification with Southern California Disposal to increase the rate to haul curbside recyclables from $25.18 per ton to $39.75 and provide an additional amount of $360,000 for the remainder of the 18-month interim period.
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Discussion
In light of the recycling marketplace’s volatility in recent years, the City Council on May 28, 2019 directed staff to reject both recycling proposals that requested a long-term contract and procure interim services to transfer curbside recyclable materials and process the materials off-site beginning July 1, 2019 (Attachment A). Staff solicited quotes from various qualified companies and deemed Southern California Disposal (SCD) the best qualified bidder for curbside recyclable materials transferring and American Reclamation the best qualified interim bidder for curbside recyclable materials processing for a period not to exceed 18 months from July 2019 through December 2020.
SCD has an existing 15-year contract with the City that expires on December 1, 2026.
Before July 2019, SCD only provided transferring services of the City’s refuse and organics (green waste and food waste), as well as construction and demolition debris generated by City capital improvement projects and City facilities. Transferring services for recyclable materials were not required of SCD because the materials were processed on City property by another City contractor.
Following the bidding process for the interim recyclable materials transferring services in June 2019, a first contract modification was executed with SCD to expand its scope of services to include interim transferring of recyclable materials for up to 18 months from July 1, 2019 through December 31, 2020.
Past Council Actions
May 28, 2019
(Attachment A)
Directed staff to reject proposals for recyclable materials processing services and return with alternative recycling options
September 24, 2019
(Attachment B)
Approved a second contract modification with Southern
California Disposal in the amount of $900,000, for a total amount not to exceed $36,900,000, for interim recyclable materials transferring services
The second contract modification approved in September 2019 increased SCD’s 15- year contract to include the cost of transferring recyclable materials at the rate of $25.18 3 of 5
per ton – the same rate as transferring other types of materials (Attachment B). Soon after submitting the September 24, 2019 staff report, City staff received a request from SCD to increase its contractual rate for interim recyclable materials transferring services from $25.18 per ton to $43.79 per ton. Since SCD has never previously transferred the City’s recyclable materials, it claimed to have underestimated the additional labor and equipment costs associated with handling recyclable materials. SCD evaluated the operation of transferring the City’s recyclable materials for the first two months of FY 2019-20. Unlike refuse, organics, or construction and demolition debris that can be compacted tightly in a transfer trailer, recyclable materials cannot be compacted as much in order to preserve the integrity of the materials and ease the sorting of different material types at the recycling processing facility. After handling the materials for two months, SCD determined it could only place an average of 12.65 tons of recyclable materials in each transfer trailer load (or trip) as compared with the 22 tons of refuse per trailer load.
Staff conducted a tonnage analysis of the same period and confirmed these amounts, in addition to calculating an average of 13.45 tons of construction and demolition debris per trailer load and 20.3 tons of organics per trailer load. Although construction and demolition debris had a similar compaction factor as recyclable materials, it represented less than one-third of the tonnage of recyclable materials and required SCD to make significantly fewer trips per month at an average of 27 trailer loads per month as opposed to 110 trips for recyclable materials. Additionally, the construction and demolition materials processing facility is eight miles closer to the City than the recyclable materials processing facility, meaning shorter travel time and less fuel. SCD incurs higher operating costs to transfer recyclable materials compared to other material types.
Staff also explored the alternatives to SCD’s current services in light of SCD’s request for additional compensation and determined that it would be best to focus on seeking and expediting a long-term solution of recyclable materials processing and transferring, which will be discussed in details in a separate staff report and study session for the 4 of 5
November 12, 2019 Council meeting.
After a careful analysis of various factors by material type, coupled with the urgent but interim nature of this service, staff recommends an increase to the rate for hauling recyclable materials to $39.75 per ton – $4.04 per ton less than SCD’s requested amount of $43.79 per ton. At $39.75 per ton, SCD’s rate is still on par with the lowest bid received. Staff recommends the Council approve the new rate of $39.75 per ton, which would be effective beginning November 13, 2019.
Overall Interim Recycling Costs
Before SCD’s rate increase request, the overall interim recyclable materials transferring and processing services cost was estimated at slightly over $2 million in the first year and $1 million for the six months in the second year for a total of $3.1 million for the 18- month period. If SCD’s rate increase request is approved, the overall interim recycling costs would adjust to $2.27 million in the first year and $1.19 million for the six months in the second year for a total cost of approximately $3.46 million over the interim period.
Estimated Interim Recycling Cost (July 1, 2019 – December 2020) Service & Service Provider
Original Proposed
FY 2019-20 FY 2020-21 18-Month
Total FY 2019-20 FY 2020-21 18-Month Total
Recyclable Materials Transferring:
SCD $600,000 $300,000 $900,000 $800,000 $460,000 $1,260,000 Recyclable Materials Processing:
American Reclamation $1,470,000 $730,000 $2,200,000 $1,470,000 $730,000 $2,200,000 Total Revised Costs $2,070,000 $1,030,000 $3,100,000 $2,270,000 $1,190,000 $3,460,000 Financial Impacts and Budget Actions
Staff seeks authority to approve funding from the Resource Recovery and Recycling Fund to increase the amount of contract with SCD for recyclable materials transferring services.
Contract Modification Request
Agreement #
Current Authorized
Amount
FY 2019-20
Modified Request
Amount
FY 2019-20 Budget
Dept Account #
Total Revised
Contract Amount
9011 (CCS) $36,900,000 $200,000 54500002.550150 $37,260,000 5 of 5
Staff seeks authority to appropriate an additional $200,000 in FY 2019-20 and $160,000 in FY 2020-21 in account number 54500002.550150 to cover the cost of interim recyclable materials transferring. Any unused budget amounts will return to the Resource Recovery and Recycling Fund.
Prepared By: Yvonne Yeung, Principal Administrative Analyst Approved Forwarded to Council
Attachments:
A. May 28, 2019 Staff Report - Recyclable Materials Processing Services (Web Link)
B. September 24, 2019 Staff Report - Southern California Disposal Second Contract Modification (Web Link)
C. Oaks Initiative Disclosure Form - Southern California Disposal City Council
Report
City Council Meeting: May 28, 2019
Agenda Item: 5.A
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To: Mayor and City Council
From: Susan Cline, Director, Public Works, Resource Recovery & Recycling Subject: Update on Recycling Center and Approval of Contract with Allan Company for Recyclable Materials Processing Services
Recommended Action
Staff recommends that the City Council:
1. Consider the Addendum with the Final City Yards Master Plan Environmental Impact Report (SCH No. 2017111053), which analyzes environmental impacts of minor modifications to the City Yards Master Plan, and adopt the resolution approving the Addendum;
2. Approve the minor modifications to the City Yards Master Plan analyzed in the Addendum;
3. Award RFP# 216 to Cedarwood-Young, Inc. dba Allan Company, a Californiabased company for recyclable materials processing services for the Public Works Department; and
4. Authorize the City Manager to negotiate and execute an agreement with Cedarwood-Young, Inc. dba Allan Company, in an amount not to exceed $10,200,000 (including a 20% contingency) for seven years, with three additional one-year renewal options in the combined amount of $6,090,000, on the same terms and conditions, for a total amount not to exceed $16,290,000 over a tenyear period, with future year funding contingent on Council budget approval.
Summary
In order to modernize its aging operations and maintenance facilities at 2500 Michigan Avenue (known as “the City Yards”), the City Council gave its conceptual approval for the City Yards Master Plan on January 27, 2015 (Attachment A). The City Yards currently houses the operations and maintenance facilities for Facilities Maintenance, Street and Fleet Services, Traffic Operations, Resource Recovery and Recycling (RRR), Water Resources, the Fire Department, and Community Services. Subject to future Council approval, it is slated for major renovation to begin later this year.
The City Council approved a design-build contract with Hathaway Dinwiddie Construction Company for the first phase of the City Yards Master Plan referenced as 2 of 11
“Package A” on October 25, 2016 (Attachment B). That first phase entails demolition of thirteen (13) existing structures and construction of six (6) new structures. The City Yards Master Plan currently contemplates the removal of the City’s existing public buyback recycling center (“the Buy-Back Center”) and the relocation of its existing recycling processing facility (“Processing Facility”), which are operated by CedarwoodYoung, Inc. dba Allan Company pursuant to an existing contract that expires on June 30, 2019.
In light of the impending expiration of Allan Company’s existing contract, City staff issued a Request for Proposals and, after evaluating the two proposals that were submitted, selected Allan Company as the best bidder to continue operations. Due to the worldwide fall in recycling commodity prices, the new proposed contract with Allan Company contains a significantly more costly price structure. Allan Company has also requested a contract term of seven years plus three (3) one-year options for the handling of the City’s recycling materials to justify the investment for the relocated BuyBack Center and Processing Facility. Staff believes the proposed cost structure is necessary given the worldwide changes in the recycling market and a longer-term agreement is justifiable.
During preliminary discussions with Allan Company, it was determined that minor modifications to the City Yards Master Plan would be required to facilitate the relocation of the Buy-Back Center and Processing Facility.
The City’s Planning Commission certified the Environmental Impact Report (EIR) for the City Yards Master Plan and approved the Development Review Permit for Package A on January 19, 2019. During the public hearing on January 19, 2019, concerns were raised about the elimination of the Buy-Back Center services.
The proposed modifications are more fully described in the draft Addendum to the Final EIR for the City Yards Master Plan (Attachment C) and entail minor improvements 3 of 11
to facilitate the relocation of the Buy-Back Center and Processing Facility, including the construction of a sound wall. The proposed modifications also include the elimination of certain proposed changes to the Fire Department Training Facility and the elimination of a proposed street vacation that were also contemplated as part of the City Yards Master Plan, but then determined to be unnecessary. The Addendum concludes that the environmental impacts associated with the proposed modifications do not constitute new or greater significant impacts than were identified in the Final EIR for the City Yards Master Plan Project.
Staff is therefore recommending the Council consider and approve the Addendum, as well as the proposed minor modifications to the City Yards Master Plan and actions necessary to enter into a new contract with Allan Company.
Discussion
The City’s Resource Recycling and Recovery (RRR) Division collects solid waste, organics, and recyclable materials from Santa Monica’s residential and commercial customers. Annually, the City collects approximately 14,000 gross tons1 of materials from the recycling containers and delivers them to Allan Company, which currently operates on a portion of the City Yards. As a material recovery facility, or MRF, Allan Company sorts, cleans, and processes the materials before it markets the valuables to domestic and overseas mills for further manufacturing uses. Since 1993, the City has contracted with Allan Company to process recyclable materials at the City Yards.
Additionally, Allan Company operates the Santa Monica Community Recycling Center (commonly known as the “Buy-Back Center”) at 2411 Delaware Avenue, which is open to the public. Santa Monica residents, as well as residents from neighboring cities, can redeem their CRV bottles and beverage containers for cash at the Buy-Back Center.
The City used to receive revenue from Allan Company for the recyclables collected daily by RRR personnel. However, due to significant market changes, Council approved a modification to Allan Company’s agreement, adding a payment structure on August 14,
1 “Gross tons” are defined as the total tonnage of materials collected from Santa Monica’s recycling containers or the total amount of materials that are placed in the recycling containers. 4 of 11
2018, due to the disruption in the global recycling market caused by China’s National Sword policy (National Sword) banning foreign recyclables (Attachment E). Once California’s – and the world’s – largest importer of recyclable materials, China determined that the imported recyclables were mixed in with too much contamination (trash) severely restricting the quantity and type of materials, and increase the contamination standard of the materials it would accept at its ports.
Past Council Actions
August 14, 2018
(Attachment E)
Second modification to agreement with Allan Company for recyclable materials processing services
The global recycling industry went into turmoil in the aftermath of National Sword.
China’s General Administration of Customs reported that recovered plastic shipments to China dropped by 99.1 percent in 2018 compared with the prior year. The loss of a major global commodity buyer caused a significant decline in market values for recyclable commodities and a substantial increase in processing costs. To cope with the stringent requirements imposed by China, recycling processors are slowing down the speed of their sorting equipment and hiring extra workers to double-sort the materials in an attempt to get the recyclables as free from contamination as possible. Many processors turned to other international markets that were oftentimes smaller and had less infrastructure to accept large volumes, but those markets offered lower prices and/or required higher shipping costs. Exhibit 1 illustrates how the value of mixed paper2, which constitutes approximately 60 percent of the City’s total recycling stream, plummeted since China’s import ban. As California State Treasurer Fiona Ma recently told the New York Times, “We are in a crisis moment in the recycling movement right now.” (Attachment F)
2 “Mixed paper” includes, but is not limited to, the following materials: Milk and juice cartons, cereal boxes, brown paper bags, junk mail, magazines, newspapers, printing and writing papers, and books. 5 of 11
Exhibit 1: The Value of Mixed Paper
Like many recycling processors, Allan Company suffered from lower revenues and higher processing costs and requested that the City adjust its payment structure to reflect current market conditions. Since the 2018 agreement modification, the City went from receiving $27.50 per net ton3 or over $300,000 per year in revenues to paying $25 per net ton or approximately $275,000 per year in expenditures.
The current agreement with Allan Company ends on June 30, 2019, and staff decided to request proposals from qualified processors and assess the rapidly shifting market conditions in the recycling industry. These proposals were evaluated for a service delivery model best suited for the City’s needs.
3 “Net tons” are defined as the total tonnage of materials that are marketable after solid waste and other non-recyclable items are removed and disposed of at landfills. 6 of 11
Vendor Selection
RFP Data for Recyclable Materials Processing Services (RFP #216) RFP Posting
Date
RFP Posted
On
RFP Advertised
in (City Charter &
Municipal Code)
# of Vendors
Downloaded
# of Submittals
Received
Date Publicly
Opened
1/28/2019
City's
Online
Bidding
Site
Santa Monica
Daily Press 30 2 2/25/2019
RFPs Received Selection Criteria
Allan
Company American Reclamation Municipal
Code
SMMC 2.24.073
Evaluation
Criteria
Competence, experience, ability
to deliver, price, stability, and
reputation
Justification to Award
As part of the due diligence process of the RFP, staff conducted site visits at two facilities owned and/or operated by Allan Company as well as the facility operated by the other proposer. Based on observations from these visits and the proposals submitted, staff recommends Allan Company as the best qualified company to provide recycling materials processing services.
Allan Company has provided recyclable materials processing services to the City of Santa Monica since 1993. The company specializes in recyclable materials processing operations; it has extensive knowledge and expertise in the recycling industry and longstanding history of operating curbside recycling facilities for several other Southern California cities including Culver City, Glendale, Pasadena, and San Diego. Additionally, Allan Company’s cost proposal provided a better opportunity for the City to realize financial benefits if the recycling industry recovers and recyclable commodity prices increase in the future. Finally, Allan Company provided less punitive pricing in the event of contamination of recyclables.
Allan Company’s proposal to invest in new processing equipment and infrastructure, which would help reduce the contamination found in the City’s current recycling stream, necessitated the need for a minimum seven-year contract with three one-year renewal options to amortize the cost of the investment.
Overall, Allan Company demonstrated a stronger capability to meet the City’s standards to achieve zero waste goals.
Market Response and Pricing
Staff reached out to various recycling companies, and 30 prospective proposers downloaded the request for proposal packet. Only two companies submitted a proposal, including incumbent contractor Allan Company. Both proposals were at a cost 7 of 11
substantially higher than our current agreement but consistent with recent paradigm shifts reported by other cities and recycling industry observers:
• a lack of interest from big waste management companies to submit proposals on municipal recycling contracts in the volatile and less lucrative current market; • a surge in recycling contractors seeking to renegotiate existing municipal contracts or establish new contracts charging cities significantly more to cover their operating costs and recoup lost profits; and
• the pressure to distribute risk of market fluctuations between contractors and municipalities.
In the proposed agreement, the City would pay Allan Company the difference between a not-to-exceed contract price ceiling and the weighted sales value of the recyclable materials from Santa Monica’s collection streams. If the commodity values increase, the City’s agreement cost would decrease. If the recycling market recovers and the commodity values exceed the price ceiling, the City would not have to pay Allan Company for its processing services and would receive revenue-sharing from the company on a 50/50 basis. Moreover, a residue4threshold would be put in place to incentivize the City to keep trash and other non-recyclable items, such as garden hoses and food-stained paper plates, out of its recycling containers in order to improve the purity and value of the materials. Allan Company has committed to assisting the City with its public education and community outreach efforts to keep the residue level at less than 20 percent, which is currently at approximately 29 percent.
Staff has assessed the recyclable commodity values for the past six months and estimated the new agreement would cost approximately $67 per gross ton, or approximately $1 million per year under the current market condition. Based on due diligence research on market conditions, a review of other cities’ contracts, and advice from industry consultants, staff deemed the proposed agreement terms a reasonable reflection of the new reality in recycling. Although this is substantially higher than the cost of the current agreement, it reflects the harsh reality faced by municipalities around
4 “Residue” is defined as solid waste and other unmarketable materials removed from the recyclables at the time of sorting and processing at Allan Company’s facility. Residues are disposed of at landfills. 8 of 11
the nation: The City of Bakersfield has gone from earning $25 per ton to paying $70 per ton; the City of San Diego is anticipating a $2.4 million decline in recycling revenue; and the City of Philadelphia’s recycling budget could increase by $2 million due to higher processing costs. The changing recycling market is summarized in the February 2019 issue brief by the National Waste & Recycling Association (Attachment G).
The Zero Waste Strategic Operations Plan that Council adopted in 2014 is currently being updated to account for the changes in the recycling industry (Attachment H).
Although the cost of recycling is rising, it is important to focus on the benefits of Reduce, Reuse, and Recycle on the environment and climate change. Recyclables are commodities, and commodity markets, by nature, have peaks and valleys. The industry will continue to pivot and adapt to recent changes, including more investments in local infrastructure and less reliance on overseas mills, and the City remains committed to its zero waste goal by 2030. Community outreach efforts that focus on educating the public on the proper ways of recycling the appropriate items are now more critical than ever to ensure the City is diverting as many recyclable materials from landfills as possible.
Implementation Plan
Upon agreement approval, the contractor would begin construction immediately to relocate the recyclable materials Processing Facility and the Buy-Back Center from its current location of 2411 Delaware Avenue to the area of the City’s existing transfer station, which is currently inactive. The two operations would be split into two separate sites due to space constraints and traffic circulation considerations. The recyclable materials Processing Facility would be moved to the southwest corner of the City Yards at 2401 Delaware Avenue in a 25,100 square-foot space that would expand to 35,100 square feet by 2023. The new Buy-Back Center would be relocated to a 14,000 squarefoot lot at 1913 Frank Street, approximately 200 feet south of the existing center (Attachment I). As part of the agreement, Allan Company would construct a sound wall as a noise mitigation measure to reflect sound generated by the Buy-Back center away from neighboring residents.
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Operations at both sites are anticipated to begin on July 1, 2019, and no service interruption is anticipated. The Buy-Back center will continue to be open to the public on weekdays from 8 a.m. to 5 p.m. and Saturdays from 8 a.m. to 2 p.m.
Environmental Review
On January 16, 2019, the City certified the City Yards Master Plan EIR (State Clearinghouse Number 2017111053). The City Yards Master Plan EIR analyzed the potential environmental effects of the City Yards Master Plan in accordance with the relevant provisions of the California Environmental Quality Act (CEQA). Pursuant to CEQA Guideline 15164(a), a lead agency must prepare an addendum to a previously certified EIR if some changes or additions are necessary but none of the conditions described in CEQA Guideline 15162 calling for preparation of an EIR have occurred (i.e., substantial changes that involve new significant environmental effects or substantially increase the severity of previously identified significant effects; substantial changes in the circumstances under which the project was undertaken, or new information of substantial importance, which was not known at the time the previous EIR was certified).
The proposed changes to the City Yards Master Plan entail minor site improvements to facilitate the relocation of the Buy-Back Center and Processing Facility, including the construction of a sound wall. The proposed modifications also include the elimination of certain proposed changes to the Fire Department Training Facility and the elimination of a proposed land swap and street vacation that were also contemplated as part of the City Yards Master Plan, but then determined to be unnecessary.
In light of these proposed minor modifications to the City Yards Master Plan, an Addendum has been prepared because none of the conditions described in CEQA Guideline 15162 have occurred which would warrant preparation of a supplemental or subsequent EIR. Based on the analysis in the Addendum, the proposed changes would not result in new or substantially more significant environmental effects than were identified in the City Yards Master Plan EIR and would not require new mitigation measures than were already required by the EIR.
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Public Outreach
Although not required under CEQA, public notice announcing availability of the Addendum to the City Yards Master Plan EIR was circulated on May 2, 2019 to all owners and occupants within a 750-foot radius of the City Yards. Additionally, the public notice was published in the Santa Monica Daily Press. The Addendum was available for public review on the City Planning website and in person at the City’s Planning Division office and public counter.
Financial Impacts and Budget Actions
Staff seeks authority to award an agreement with Allan Company for recyclable materials processing services including a 20% contingency.
Agreement Request
Request
Amount
FY 2019-20 Budget
Department Account #
Total Contract
Amount
$1,140,000 54500002.523010 $16,290,000
Budget authority for subsequent budget years will be requested in each budget for Council approval. Future year funding is contingent on Council budget approval.
At the time of this report, staff projects the fund to be self-sustaining through FY 2020-
21. A rate study is actively underway to analyze the need for potential rate adjustments in FY 2020-21 in order to maintain the City’s commitment to its zero waste goal and environmental sustainability. With the shifting economic climate in the recycling world, municipalities around the country are grappling with the new reality that “recycling is not free” and cannot continue to be free if a recycling program were to remain fiscally sustainable in the long run. Some cities and counties are reporting double-digit rate increases, and others have suffered program reductions due to lack of funding. Staff will return to Council with a recommendation for potential rate adjustments in early 2020. 11 of 11
Prepared By: Delana Gbenekama, Communications and Marketing Coordinator Approved Forwarded to Council
Attachments:
A. Staff Report - Conceptual Approval of the City Yards Master Plan, January 27, 2015
B. Staff Report - Approval of Design Contract for the City Yards Master Plan, October 25, 2016
C. Addendum to the City Yards EIR
D. Resolution - City Yards Modernization EIR Addendum
E. Staff Report - Second Modification to Recycling Contract, August 14, 2018 F. New York Times Article on Recycling, March 16, 2019
G. Zero Waste Strategic Operations Plan
H. Site Map
I. Written Comments
J. Issue Brief from the National Waste and Recycling Association, February 2019 K. Allan Company Oaks Initiative Disclosure Form
L. SUPPLEMENTAL STAFF REPORT
M. Written Comments
N. Powerpoint Presentation
City Council
Report
City Council Meeting: September 24, 2019
Agenda Item: 3.B
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To: Mayor and City Council
From: Susan Cline, Director, Public Works, Resource Recovery & Recycling Subject: Interim Recyclable Materials Transferring and Processing Services Recommended Action
Staff recommends that the City Council:
1. Authorize the City Manager to negotiate and execute a second modification to contractual services agreement #9011 (CCS) in the amount of $900,000 (including contingency) with Southern California Disposal Company, a California-based company, for recyclable materials transferring services for the Public Works Department. This will result in a 15-year amended agreement with a new total amount not to exceed $36,900,000, with future year funding contingent on Council budget approval.
2. Authorize the City Manager to negotiate and execute a first modification to contractual services agreement #4603 in the amount of $1,950,000 with American Reclamation, a California-based company, for recyclable materials processing services for the Public Works Department. This will result in an 18- month amended agreement with a new total amount not to exceed $2,200,000 (including a 30% contingency), with future year funding contingent on Council budget approval.
3. Authorize budget changes as outlined in the Financial Impacts and Budget Actions section of this report.
Summary
In the midst of a statewide recycling market crisis, the City’s long-standing service agreement for on-site recyclable materials processing and community recycling center expired on June 30, 2019. At its May 28, 2019 meeting, the Council directed staff to reject all proposals and procure services on an interim basis to transfer and process curbside recyclable materials off-site beginning July 1, 2019 and present additional longer-term recyclable materials processing and community recycling center options at a future Council meeting (Attachment A). The timeframe of interim services is anticipated to be a sufficient period of time to bid out services after Council direction next month. Staff solicited quotes from various qualified companies for these contracts and deemed Southern California Disposal (SCD) the best qualified bidder for curbside 2 of 7
recyclable materials transferring and American Reclamation the best qualified bidder for curbside recyclable materials processing.
As interim measures, staff kept SCD’s existing contract with the City at the original contract authority and established American Reclamation’s new contract at $250,000 to stay within the City Manager’s contract approved threshold. At this time, staff recommends: 1) executing a second contract modification to increase SCD’s 15-year contract by $900,000 to an amount not to exceed $36,900,000, and 2) executing a first contract modification to increase American Reclamation’s 18-month contract by $1,950,000 to an amount not to exceed $2,200,000. Staff will return to Council next month to seek direction on the rebidding of longer-term recyclable materials transferring and processing services and present options for recycling or redemption services for the community.
Discussion
The City had contracted with Cedarwood-Young Inc. (dba Allan Company) for curbside recyclable materials processing and the operation of the Santa Monica Community Recycling Center, also known as the Buy-Back Center, since 1993. That agreement expired on June 30, 2019. Staff issued a request for proposals for a new recycling contract beginning July 1, 2019. After a formal bidding process and an evaluation of the two proposals received, staff recommended Allan Company as the best qualified company to process the City’s curbside recyclable materials and operate the Buy-Back Center on City property at approximately $67 per gross ton of recyclables or $951,000 in the first year (or $1.24 million including a 30% contingency).
Due to a variety of factors, including long-term cost concerns, at its May 28, 2019 meeting, the Council directed staff to reject all bids, which included services for on-site recyclable materials processing and the management of a Buy-Back Center, and proceed with interim arrangements with off-site processing of recyclable materials. To implement Council direction for off-site recyclable materials processing, staff sought quotes from qualified companies for interim recyclable materials transferring and off-site recyclable materials processing services only. A request for quotes for a Buy-Back 3 of 7
Center was not initiated, which was consistent with Council direction to return at a later date to present options for recycling or redemption services for the community. These options are scheduled to be presented with the Zero Waste Plan update at the October 22, 2019 Council meeting. The interim arrangement has required two separate agreements. First, the recyclable materials collected curbside by the City’s Resource Recovery and Recycling personnel need to be transferred to a recycling processor outside of the City. Second, the collected materials need to be processed and sold into the recycling market.
Interim Recyclable Materials Transferring Services – Southern California Disposal SCD has an existing 15-year contract with the City that was approved by Council in 2008 (Attachment B). As memorialized in a Notice to Proceed issued by the City, the initial term of the 15-year contract commenced on December 1, 2011, and expires on December 1, 2026. The original contract authority was $2.4 million per year, or up to $36 million over the initial 15 years, with three five-year renewal options afterwards through 2041. The original scope of services includes transferring services of refuse, organics (green waste and food waste), and construction and demolition debris generated by City capital improvement projects and City facilities only.
As part of establishing an interim recycling arrangement, staff contacted several qualified companies for interim recyclable materials transferring services. Three quotes were received, and SCD was deemed the best bidder because of its low price as compared with the other bids and its experience with transferring the City’s curbside solid waste materials since 2008.
Following the bidding process, a first contract modification was executed with SCD in June 2019 to clarify its scope of service to include interim transferring of recyclable materials for up to 18 months from July 1, 2019 through December 31, 2020. The interim recyclable materials transferring services were quoted at $25.18 per ton and are estimated to cost up to $600,000 in the first year in FY 2019-20 and $300,000 for six months in FY 2020-21 for a total amount of $900,000 over 18 months, including a 30% contingency.
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Interim Recyclable Materials Processing Services – American Reclamation Staff contacted multiple qualified companies for interim recyclable materials processing services off-site. Three quotes were received, and American Reclamation was deemed as the best bidder at a cost of approximately $69 per gross ton of recyclables. An interim contract was established on a month-to-month basis with a six-month termination notice requirement.
The contract term is up to 18 months from July 1, 2019 through December 31, 2020.
The interim recyclable materials processing services are estimated to cost up to $1,470,000 in the first year in FY 2019-20 and $730,000 for six months in FY 2020-21 for a total amount of $2,200,000 over 18 months, including a 30% contingency.
Given the short time of needing a new contract, staff decided to limit American Reclamation’s initial contract cost to $250,000 under the City Manager’s maximum contract approval threshold and return to Council to seek additional funding authority after contract execution.
Overall Interim Recycling Costs
The overall interim recyclable materials transferring and processing services cost is estimated at slightly over $2 million in the first year and $1 million for the six months in the second year. This amount includes a 30% contingency to address any unforeseen circumstances during this interim period, including a potentially increased amount of materials collected at curbside due to the closure of the Buy-Back Center. Any unused funds set aside for these contracts will be released back to the Resource Recovery and Recycling Fund.
Estimated Interim Recycling Cost (July 1, 2019 – December 2020) Service & Service Provider FY 2019-20 FY 2020-21
(6 Months)
18-Month
Total
Recyclables Transferring: SCD $600,000 $300,000 $900,000 Recyclables Processing: American Reclamation $1,470,000 $730,000 $2,200,000 $2,070,000 $1,030,000 $3,100,000
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Past Council Actions
May 28, 2019
(Attachment A)
Council directed staff to reject proposals for recyclable materials processing services and return with recyclable materials processing and Buy-Back Center options
November 25, 2008
(Attachment B)
Council awarded contracts to Southern California Disposal and Cedarwood-Young Inc. dba Allan Company for transfer and recycling services
Financial Impacts and Budget Actions
Materials Transferring – Southern California Disposal
Contract Action
Based on the estimated costs outlined above, staff recommends increasing the total contract authority of SCD’s contract #9011 (CCS) by $900,000 through a second modification, which increases the not-to-exceed contract amount from $36,000,000 to $36,900,000 for the interim transferring services of recyclable materials through December 2020 and transferring services of refuse, organics, construction and demolition debris through December 2026. The revised estimated contract expense for FY 2019-20 is $3,660,000.
Contract Modification Request: Agreement # 9011 (CCS)
Current
Authorized
Amount
FY 2019-20
Modified
Request
Amount
Future Year
Funding Account # Total Revised Contract Amount
$36,000,000 $600,000 $300,000 54500002.550150 $36,900,000 Budget Action
Staff recommends an additional budget appropriation of $600,000 in FY 2019-20 and $300,000 in FY 2020-21 in account number 54500002.550150 to cover the cost of interim recyclable materials transferring. Any unused budget amounts will return to the Resource Recovery and Recycling Fund.
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Interim Recyclable Materials Processing – American Reclamation Contract Action
The total cost of American Reclamation’s processing services is estimated at an amount not to exceed $1,470,000 in FY 2019-20 and $730,000 in FY 2020-21, including a 30% contingency. (The interim recyclable materials processing arrangement expires six months into FY 2020-21, hence the lower estimated expense in the second year.) Since American Reclamation’s contract was originally established at $250,000 and the total estimated contract cost is $2,200,000, staff recommends modifying American Reclamation’s contract #4603 to increase the total contract authority by $1,950,000 for interim processing services of recyclable materials through December 2020.
Contract Modification Request: Agreement # 4603
Current
Authorized
Amount
FY 2019-20
Modified
Request
Amount
Future Year
Funding Account # Total Revised Contract Amount
$250,000 $1,220,000 $730,000 54500002.523010 $2,200,000 Budget Action
Staff seeks authority for an additional budget appropriation of $556,000 to account 54500002.523010 in the Resource Recovery and Recycling Fund in FY 2019-20 for this unbudgeted expense. Any unused budget amounts will return to the Resource Recovery and Recycling Fund, and future year budget action requests can be evaluated at a later time upon Council approval.
Prepared By: Yvonne Yeung, Principal Administrative Analyst Approved Forwarded to Council
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Attachments:
A. May 28, 2019 Staff Report - Recyclable Materials Processing Services B. November 25, 2008 Staff Report - SCD and Allan Company Contract Awards C. Oaks Initiative Disclosure - Southern California Disposal D. Oaks Initiative Disclosure - American Reclamation