Title
Materials Recovery Facility Operations and Materials Marketing (North Gateway and 27th Avenue Transfer Stations) Requirements Contract Amendment (Ordinance S-47157)
Description
Request to authorize the City Manager, or his designee, to amend Contract 131492, Materials Recovery Facility (MRF) Operations and Materials Marketing (North Gateway and 27th Avenue Transfer Stations) between the City of Phoenix and ReCommunity (now Republic Services). Further request authorization for the City Treasurer to accept, and for the City Controller to disburse, all funds related to this item.
Report
Summary
Republic Services/ReCommunity operates the City's two MRFs and is responsible for marketing recyclable commodities that are captured in those processes. The contract was originally approved by City Council on June 8, 2011, for a 10-year term with three, one-year options to extend, and has been amended several times over the term to address changing market conditions. On Sept. 30, 2015, in response to depressed commodity sales values and increased processing expenses, Council amended the contract to increase the revenue share percentage to the Contractor from a flat 10% to a tiered scale from 9% to 23% depending on commodity values. On Feb. 6, 2019, Council amended the contract to authorize the Contractor to purchase and install new specialized equipment at the North Gateway MRF (S-45359). This amendment was completed to improve capture of recyclables and reduce operating expenses. On June 5, 2019, Council amended the contract to modify the revenue share percentage to the Contractor from a tiered scale of 9% to 23% depending on commodity values, to a flat 15%; increase the processing fee by $15.00 per ton; and remove the guaranteed minimum floor prices for all commodities and set all floor prices to zero (S-45781). This amendment was completed in response to depressed commodity sales values due to China’s National Sword policy and increased processing expenses.
Republic Services/ReCommunity is reporting that current operating expenses at the MRFs exceed the current processing fees. This was confirmed in an independent audit reviewed by the City, particularly at the 27th Avenue MRF. At this time, the option of early contract cancellation and a rebid is not recommended as the recycling industry is under extreme financial pressure and a rebid may result in less-favorable contract conditions for the City.
The proposed contract amendment includes the following; other contract terms remain the same:
Effective Jan. 1, 2021, the City will retain from the most recent contract amendment the processing fee addition of $15.00 per recycle ton processed and the zero dollar guaranteed minimum floor prices for all commodities; in addition, the City will add a one-time minimum wage adjustment of 1.25% (the same adjustment percentage authorized by state law) and add $8.00 per ton to all recycle tons processed at the North Gateway MRF. The result will be a processing fee of $65.08 per ton for the first 100,000 tons processed and a processing fee of $57.95 per ton for each ton thereafter.
Effective Jan. 1, 2021, the City and the Contractor will consolidate MRF operations at the North Gateway MRF; recycle volume will be transported by the City to the North Gateway MRF for processing.
Effective Jan. 1, 2021, modify the revenue share to a fixed amount of 88% share to the City and 12% share to the Contractor.
Effective Jan. 1, 2021, modify performance standards for the Recyclables Residue Guarantee from 1% to 5%, with a financial penalty if going above 10%.
Contract Term
Contract 131492 was approved by City Council on June 8, 2011, for a 10-year term with three, one-year options to extend. This amendment applies to calendar year 2021, with three, one-year options to extend to Jan. 31, 2025.
Financial Impact
This amendment is estimated to add $1,435,634 million in additional processing expenses from Jan. 1, 2021 through the end of the initial contract term of Jan. 31, 2022. Actual fees and revenues from this contract and amendment may be higher or lower depending on recycling tonnage collected and commodity sales. Funding is available in the Public Works Department Solid Waste operating budget.
Concurrence/Previous Council Action
Contract 131492 was approved by City Council on June 8, 2011. City Council approved contract amendments on Sept. 30, 2015, Feb. 6, 2019 (S-45359) and June 5, 2019 (S-45781).
Location
North Gateway Material Recovery Facility, 30205 N. Black Canyon Hwy.
27th Avenue Material Recovery Facility, 3060 S. 27th Ave.
Council Districts: 2 and 7
Department
Responsible Department
This item is submitted by Deputy City Manager Karen Peters and the Public Works Department.