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Council votes to renegotiate recycling contract with Greenstar

Friday, December 18, 2009 by Jacob Cottingham

City Council has voted to authorize a renegotiation of its contract with Greenstar, the company hired to transport, process and sell recycling material from Austin’s Single Stream program until the city completes its own materials recovery facility.


The current contract went into effect in October 2008 and has a two-year term with two six-month extensions possible. That contract also stipulated transportation and processing fees were to be deducted by Greenstar from the gross revenue from the sale of recyclable materials collected by Austin.


However, because the price Austin gets for recyclables is less than the transportation and processing deductions, the city will owe Greenstar $2.6 million at the end of the contract.


To remedy the situation, Greenstar presented three options to the city. The first option would take off $20 per ton of material if the city committed to extending the contract through 2013. City staff estimated savings of approximately $4,500,000 over the 60-month period. Option Two would reduce the processing fee by $5 and extend the contract through September of 2011. This option would also include the possibility of extending the contract through four six-month periods. Staff estimated savings of $560,000 with option two through the 36-month period.


The third option, recommended by the Solid Waste Advisory Commission, would shave $3.50 off each ton of processing and extend the contract through March of 2011, then scale back to 50 percent processing from then until September of 2011. It would also allow four six-month extensions and staff estimate savings of $400,000 over the course of the non-extended contract.


SWAC had voted 5-1 to recommend to Council that it authorize city staff to negotiate Option Three with a few additional conditions. Those included that the city utilize the current contract audit procedures; to request Greenstar to specify the definition of market prices, and to obligate Greenstar to recycle all materials sent to them.


Council members, and several of the speakers who weighed in on the item, were concerned Thursday with the timing of a contract extension and the completion of a new facility for recyclables. The new material recovery facility (or MRF, pronounced “murph”) would not incur the heavy transportation costs associated with the Greenstar contract. The city currently has a request for proposals out for an MRF that would process the recyclable materials from the single stream plan. That RFP will not be closed until Feb. 9.


Assistant City Manager Robert Goode told Council, “There could be some proposals that are operating by September 2010, we don’t know that and we also don’t know what you all will select at the end of the day.” He referred to “risk and reward options” in front of council, saying that a longer contract would be cheaper but risks missing out on savings from an unknown entity that would build a local MRF. Speculation about when a local MRF would be completed ranged, with SWAC member JD Porter telling council one could be completed by September 2010 while Goode said staff thought January to August 2011 was more realistic.


Goode said staff expects that a contract won’t be awarded for a new recycling processor until June or July 2010. Therefore, whoever wins the contract would have about 3 months after the contract is awarded for a MRF to be running. He called this “a pretty big gamble.” Any information would be back in front of Council in April, Goode said. Staff also concluded that each month the city stuck with the existing contract without executing a new one, would cost about $40,000.


Council Member Bill Spelman made a motion to move forward with option three and allow staff to execute the negotiated agreement rather than bringing it before Council again, which would likely incur a month long delay. Council Member Chris Riley said he preferred to have the new Solid Waste Services Director’s input. The new director, Robert Gedert, will start on Feb.1.


After Spelman’s motion, more maneuvering ensued, with Mayor Pro Tem Mike Martinez seconding Spelman’s motion, then withdrawing the second when he realized it allowed execution of the contract. Council Member Sheryl Cole then stepped in and seconded the motion. Council Member Randi Shade then attempted to add a friendly amendment to Spelman’s motion that would strip the execution part off. Spelman refused but a majority of his colleagues disagreed.


Cole then requested a friendly amendment that the motion include authorization to pay Greenstar money owed. The company has carried the services to the city, which are supposed to be deducted from earnings from the sale of recyclables – except those costs aren’t being covered. Council Member Laura Morrison wanted to know what that decision would cost the city – which would not be able to leave the millions in the bank to earn interest.


Shade said the early payment was part of Option Three and allowed, along with the extended contract time, the less expensive option. With that, council voted 7-0 to authorize negotiation of the new contract and re-examine the issue in early 2010.

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