The city’s belabored saga of selecting a long-term recycler hasn’t taken as long as you might think.
It’s taken longer.
The Hustle was reminded of that this week as he began prepping this column, fielding eleventh-hour developments as Austin prepares to finally name a contractor to handle our Blue Bin stream of recyclables by either delivering, per staff recommendation, 100% of the business to Balcones Resources; engineering, per council buzz, a split between Balcones and fellow finalist Texas Disposal Systems; or, owing to some miraculous turn of fortune in favor of TDS, giving that company all the work. The item was postponed from City Council’s last meeting, and it’s slated to return April 21.
The rigmarole over alleged lobbying violations, bungled bidding rounds, and contract negotiations that led us to this point has been stretched out longer than the biodegradable lifespan of a plastic bag. Now, a TDS-initiated debate over whether the city’s contract projections are completely accurate may further lengthen that timeline.
Austin’s efforts in the recycling department go back further still. Council got serious about revamping the city’s recycling efforts around 2009, but it was in 2007 that the Solid Waste Advisory Commission first voted on a contract to design and permit a materials recovery facility – a way station for sorting and shipping single-stream recyclables. As astute (or obsessive) readers may recall, that vote led to then-Solid Waste Services Director Willie Rhodes contracting with consultants R.W. Beck for $1 million on plans for a MRF that never got built, as its projected cost ballooned from $17 million to $86 million – a good chunk of the reason Rhodes is now the former SWS head, having been shuffled to Code Compliance.
Running the Numbers
We recount the above to illustrate not only the tortured semirecent history that has led to this moment, but also to emphasize that recycling is big business. That’s why it shouldn’t be surprising to see TDS’ tenacity in questioning the city’s figures that led to staff’s call to award all recycling business to Balcones. One of TDS CEO Bob Gregory’s gripes with SWS Director Robert Gedert’s analysis is that it estimated costs for both bidders based only on the last five months of recycling market data. Gregory believes those current market projections are unusually high – “It’s just nothing but straight up, and we’re going to the moon,” he says. Gregory also claims that the premium Balcones has promised to pay the city for its “fibers,” or paper recyclables, shouldn’t be factored into the company’s bid; additionally, TDS has issues with the city’s contract that Balcones does not, like a reset date three years into the 20-year contract when the city can either negotiate for better terms or go elsewhere.
Gedert countered these and other claims in an April 1 memo, arguing that concerning the market projections, “It doesn’t matter what you call the market; it just matters how the proposals perform under those conditions,” and saying Balcones’ fiber premium “doesn’t ‘make or break'” the bid under most market scenarios.
But arguably, Gedert buried his lede: Toward the end of a long passage cataloging program costs, the director notes “a misconception regarding the ‘money making’ perspective of this program. … The program saves our community millions of dollars every year compared to landfilling recyclables and is a great success,” the memo continues, “but the revenue generated by the program was not going to offset the overall expenses. … Our single stream recycling program is a great success,” he says, but “the overall program’s costs will not be completely offset by the revenue we get from the material.”
Recycling the Money
That’s an especially bearish outlook, and it factors into the best practices the city demands of its contractors, like living wages and carbon offsets. But nothing’s been terribly easy in this process – and that appears to be why TDS is still holding out on some terms, like the reset dates. “We’ve spent over $100,000 in outside legal fees negotiating this 138-page document,” says Gregory, “and it’s a three-year contract.”
His biggest fear is that the city will ultimately enter the recycling business itself. Last year, the city’s Purchasing Department indeed bid to run a MRF itself. Although the proposal states that it was prepared in order to “provide a baseline” against private-sector proposals, additional language, including the assertion that such a proposal “removes the middle-man,” sets Gregory on edge. (Admittedly, the idea of the city entering into a “no-contact” period with itself under bidding rules is pretty bizarre.) “All that talk about ‘the sanctity of the process’ … it’s a joke,” he says, and he claims that TDS’ initial removal from the MRF bidding process was done “all in an attempt to eliminate us – and I just had the gonads to build the thing anyway.”
Unsurprisngly, Balcones CEO Kerry Getter echoes Gedert’s support of his company’s proposal; regarding the higher fiber premium it promises to pay, Getter says Balcones developed relationships with its buyers over decades: “The guys that do the buying for these things are beer-drinking buddies of my brothers,” he says.
And with staff proposing to give Balcones 100% of the city’s stream, Getter should be smiling. However, judging from previous comments on the dais, council may see value in two companies working the city’s stream. With Balcones building an MRF in Northeast Austin, and TDS’ MRF down south in Creedmoor, it’s not hard to imagine a 60-40 split under which Balcones accepts everything north of the river and TDS everything south.
But if we’ve learned anything, it’s not to make recycling assumptions. That, and while the city may be lucky to break even, the contracts are incredibly valuable to their competing bidders.
For a single stream of Hustle, follow us on Twitter @CityHallHustle. Point Austin returns – with Michael King in tow – from vacation next week.
This article appears in April 15 • 2011.