The Fresno City Council voted 5-2 Thursday to approve a recycling contract with Mid Valley Disposal and Cedar Avenue Recycling and Transfer Station that will pay the city for its recyclables.
But city administrators say the deal will cost the city around $2.7 million in lost profits because the council turned down a much higher rate in October.
I hope you can appreciate my frustration over the process and the outcome.
City Manager Bruce Rudd to the Fresno City Council
Fresno City Manager Bruce Rudd blasted the council, which rejected a much better deal in October because most council members were uneasy with Rudd handling the deal entirely independent of them. That deal would have given all of the recycling to Mid Valley, which promised a $10 per ton rate for 10 years. At the current rate, the city would make $300,000 over the period.
“I hope you can appreciate my frustration over the process and the outcome,” Rudd said from the dais. “We worked hard for two years to get to this point. You’re squandering all the hard work and successes we’ve had in the past.”
Rudd said in an interview after the vote that Mid Valley was still offering $5 per ton if the city gave it 100 percent of the contract.
“The council believes that value isn’t worth as much as competition,” Rudd said with a shrug. “I had one goal in all of this: Get the best value.”
Fresno City Council Members Lee Brand and Clint Olivier voted against the contract. They were in favor of restarting the bidding process.
“From the beginning, I’ve been dissatisfied with the process,” Olivier said. “I trust a professional city manager and waste industry consultants to come up with the answer. The elected body shouldn’t be issuing trash contracts, because we don’t have experience in the industry.”
Council Member Steve Brandau, who spearheaded the effort to restart the process, admitted that the new contract was less than ideal.
“Unfortunately, we had a flawed setup and process that took place in October and the markets took a dive since then,” he said. “That made an impact from where we once wanted to be to where we are now.”
Brandau added that the city once paid Mid Valley $18.50 per ton for recycling pickup, and will now be getting paid.
Unfortunately, we had a flawed setup and process that took place in October.
Fresno Council Member Steve Brandau
Richard Caglia, of Cedar Avenue Recycling and Transfer Station, told council members they were getting a great deal with the current offer.
“The (recycling) market is worse now than when you were paying for pickup,” he said.
In December, the council rejected a plan for green waste and recycling contracts proposed by Rudd. He then recommended the council hire an outside consultant and restart the bidding process, but he was overruled. Instead, the council directed City Attorney Doug Sloan to negotiate a deal with the top two bidders.
In 2014, the city was paying Sunset Waste Paper $18.50 per ton for recycling pickup within Fresno. Mid Valley later bought out Sunset.
Rudd believed the city should be the ones being paid for its recycling and negotiated a 10-year deal with Mid Valley to pay at least $10 per ton. Mid Valley also agreed to waive a $900,000 payment owed by the city as part of a prior settlement.
Rudd said Mid Valley also offered the city a “significantly better rate” on green waste pickup than the $24 per ton it paid two different companies previously, though he declined to give a number.
The council didn’t like the length of the deal, though, and the members were unhappy that it was negotiated without their knowledge. They were concerned about Mid Valley monopolizing city waste collection, so they blew up the process. The city ended up cutting a check to Mid Valley for the $900,000 owed.
Meanwhile, the recyclables market tanked during the negotiations between Sloan and the recycling bidders.
Sloan said the price per ton of recycled paper was around $130 last summer, when the first contracts were negotiated. Now, the price sits at $80 per ton.
This caused both Mid Valley and Cedar to change the deal.
The new contract will now pay the city an indexed rate per ton. It will bottom out at $1, and increase to $2 per ton if recycled paper prices rise above $109.99 per ton. The payment to the city increases by $1 for every $10 increase in the total price, topping out at $20 per ton if businesses are selling recycled paper for $200 or more per ton.
Rudd blasted the council for this, saying his guaranteed $10 per-ton rate with Mid Valley would have generated $3 million over the 10-year span. If prices remain below $110 per ton, the city now stands to make $300,000.
The council also voted 7-0 in favor of awarding Fresno’s green waste proposal to Kochergen Farms Composting, Inc. and West Coast Waste, Inc. The city will pay each $16.75 per ton. City administrators had no problem with this, as it was very similar to the deal they proposed in October.