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Texas Disposal raises concerns about staff recycling calculations

Monday, April 4, 2011 by Michael Kanin

Texas Disposal Systems continues to challenge the validity of the City of Austin’s conclusions about the costs of two potential versions of a contract to handle the city’s single stream residential recycling. The firm’s latest concerns stem from the commodities market calculations that staff used to determine both the pricing of both TDS and its competitor, Balcones Recycling.


The issues arise as Council is scheduled to take a final vote on the matter on Thursday. The city’s Solid Waste Advisory Commission is set to make a recommendation on the deal on Wednesday.


However, it is not clear whether that will happen. Mayor Pro Tem Mike Martinez told In Fact Daily that he had been going through the proposals of the two companies and noted that it was “a lot of information.”


“I’m not sure I’m going to get to a decision by Thursday,” he said.


Council Member Randi Shade is taking a wait-and-see attitude. “I do have some questions and assuming I get the answers to those questions then I could be in a position to be able to vote,” she told In Fact Daily. “If I don’t have the answers to those questions then I could be in a position to support a postponement while we get the answers to those questions.”


Texas Disposal and Balcones Recycling have each been engaged in extensive negotiations with the city over the deal, which would offer Austin a 20-year agreement for prospective handlers of its residential single stream recycling efforts. The contract would have periodic reset dates, which concerns Texas Disposal CEO Bob Gregory. “It’s a three-year deal,” he said.


Another of Gregory’s concerns centers on the figures that city staff used to calculate prices for the commodities that would be sold by its recyclers after they’ve processed waste. In a presentation to Council on March 24, Austin’s Solid Waste Services Director Bob Gedert explained that his team had taken the most recent five months of combined market history and spread it out over a year.


Gregory says that those five months represent all-time highs in that market. “Bob (Gedert) says, ‘We’re going to take the last five months and we’re going to call it the current average,’” he said. “’And we’re going to say 20 percent down (the lowest numbers in the city’s calculations) … is still $2 higher than the (market) average. And we’re going to say the top … which is higher than it had ever been (in the city’s numbers), and we’re going to assume that’s where it’s going to go on from now on,’” he said.


Gregory claims that the city’s calculations are overly hopeful, and that a more reasonable estimation – which he suggests should be based on an all-time market average – would level estimates for city costs (and payments). In a series of graphs that he is showing to Council members, Gregory offers a set of calculations done by Texas Disposal staff. There, he claims that the difference in price between a deal with his company and Balcones would have saved the city almost $1 million in a low market. In an average market, he claims he could save the Austin’s taxpayers just under $200,000.


However, according to Texas Disposal calculations, in a high market, Balcones would beat their best prices by roughly $200,000. Still, Gregory thinks it’s a gamble worth taking.


Texas Disposal’s numbers were calculated using data that was collected for a blended commodities market between April 2005 and February 2011.


City staff has estimated that a contract with Balcones could net Austin $1.2 million more than a deal with Texas Disposal over three years.

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