The Daily Hustle: 3/25/11

Talks on awarding the city’s long-suffering, long term recycling contract dominated City Council’s meeting yesterday. And while Solid Waste Services’ suggestion to award the contract entirely to Balcones Resources would create the most value for the city, the discussion doesn’t look over yet.

To truncate SWS director Bob Gedert’s presentation, the city looked at “four legs of the full fiscal analysis:” processing fees the two finalists, Balcones and Texas Disposal Systems, would pay the city; facility fee reimbursements to the city, in the form of carbon offsets (either cash, or, in TDS’ proposal, an actual tree for every 1,000 tons processed); revenue shares with the city; and collection and delivery costs. They tabulated these costs for the competitors under several different scenarios, with one company receiving all the city’s stream, or sharing the stream in different ratios.

SWS estimated lower processing fees from a 100% TDS arrangement, and the best collection and delivery costs in a 60/40 Balcones/TDS split. In the remaining categories, SWS proposed awarding 100% of the contract to Balcones, a recommendation that carried over to their “bottom line” recommendations, reproduced below.

Gedert noted Balcones also agreed to terms TDS did not, including a “most favored nation” clause stating should the company take on another municipal waste stream from the area, the city could re-negotiate should that new customer get a lower rate. The 20 year contract also contains “reset dates” – the first of which is in three years – where the city could re-solicit the companies (and presumably others) for the best bids. Gedert said the flexible contract is “a national model that … [is] being watched fairly carefully by zero waste communities across the nation. And as we design this contract, including the master agreement and the service schedules and these concepts here, this is a model agreement that will set the tone for future recycling contracts across the nation.”

Despite Balcones’ acceptance of all the city’s terms, and Gedert’s declaration the contract “saves the city approximately – if you look at low, medium and high markets – about $400,000 a year from the next closest proposal, or $1.2 million over the first three years,” council seemed concerned about giving the entire stream to Balcones – or shutting politically-connected TDS out. Lee Leffingwell said “there's probably some inherent value,” albeit “probably hard to quantify,” in have two separate contractors with their own material recovery facilities. “It seems like we were in this situation not too long ago where we had 100% of our recycling resources dedicated to one – to one recycler, and we had problems with that because when the economy went down, we were in a situation where it was hard – we were kind of stuck and we had to look for things we could do. And that's where we are now.” Gedert replied throughout their six months of negotiation, they considered competition “a high value to the city,” but said ultimately, “I see approximately a $400,000 difference in net revenue to the city per year for a three-year city of $1.2 million. The question is is the value of that split load worth sacrificing that 1.2 million. And sacrificing is a harsh term. It's a tradeoff. Is that value a good tradeoff? And I find that differential too high to make that tradeoff.” Before Leffingwell finished however, he noted “When we make our decision, it will be more than just strictly numbers because those numbers are estimates anyway. There is no guarantee what those numbers are going to be. We thought we had one before and we didn't.”

A final presentation on the contract is due at the Solid Waste Advisory Commission April 6, with council action expected the following day, April 7.

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