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andmarketingofrecyclables."Basedon2,560households,thetotalcostwas$86,518forthe <br />firstfullyearofservice.Section6.1ofthecontractalsoincludesaprovisiontoadjusttheper <br />householdservicefeeeachyearinaccordancewiththeconsumerpriceindexfortheUpper <br />MidwestasdeterminedbytheFederalReserveBankofMinneapolis.Themonthlyfeeis <br />adjustedontheanniversaryofthecontract.StartingonMarch1,2009,themonthlyper <br />householdcostincreasedby3.8percentto$3.06.Thismonthlycostperhouseholdandthe <br />annualincreasewasanticipatedinthe2009recyclingbudget. <br />Section6.2describestherevenueshareportionofthecontract(page7ofAttachmentA).Under <br />section6.2.1,AllPaperGrades,thecontractstates,"TheContractorshallpaytheCity50%of <br />this[OfficialBoardMarkets]indexforallgradesofpapercollectedafteraprocessingfeeof$75 <br />perton."Similarly,undersection6.2.2regardingaluminum,thecontractstates,"TheContractor <br />shallpaytheCity50%ofthis[AmericanMetalMarket]aluminumindexafteraprocessingfee <br />of$150perton."TheOBMandAMMarecommonsourcesforobtainingmarketpricesfor <br />recyclingmaterials.StaffsandtheCityAttorney'sreadingofsection6.2.1ofthecontractis <br />thatwhenthereisrevenuetoshare,Eurekaretainsa$75pertonprocessingfeeforpaperanda <br />$150pertonprocessingfeeforaluminum.Theremainingrevenueissplitinhalfbetween <br />EurekaandtheCity.Ifthereisnotsufficientrevenuetocovertheprocessingfee,theCitywould <br />notreceiveanyrevenueshare.Inotherwords,papermustbemorethan$75pertonand <br />aluminummorethan$150pertonbeforethereisrevenuetoshare. <br />Forexample,ifthemarketpriceforpaperwas$100perton,a$75pertonprocessingfeewould <br />bechargedandtheremaining$25pertonwouldbesplitbetweentheCityandEureka. <br />However,ifpriceswere$50pertonforpaper,theCitywouldnotreceiveanyrevenueshare <br />becausethe$75pertonpaperprocessingfeewouldnotbecovered.TheCitywasawarethat <br />revenuesharingwasnotaguaranteeandsomemonthsmaynothaveanyrevenueshareifprices <br />fellbelowtheprocessingfee.ItwasstaffsunderstandinganditwaspresentedtotheCouncilin <br />December2007thatsomemonthsmaynothaveanyrevenuesharebutthemonthlypricewould <br />notincrease. <br />IntheproposalsubmittedbyEurekain2007,theyanticipatedarevenueshareof70centsper <br />householdpermonthbasedoncollectionratesandmarketpricesin2007.However,inOctober <br />2008,themarketpriceforrecyclablesdroppedprecipitously.TheCitycollectedapproximately <br />$16,800inrevenuesharebetweenMarchandOctober.BasedonEureka'scalculations,theCity <br />hasnotreceivedanyrevenuesharesinceNovember.AccordingtoEureka,arecoveryinthe <br />recyclingmarketisnotanticipatedthisyear. <br />PriortoreceivingtheinvoiceforJanuaryrecyclingservices,EurekainformedtheCityofan <br />errorontheDecemberinvoice.ByDecember2008,thepriceforpaperhaddroppedto$30/ton. <br />Consequently,theCitydidnotreceiveanyrevenueshareforpapermaterials.TheCitywould <br />havereceivedarebateof$510foraluminum;however,thatwasretainedtocovertheir <br />processingcostsforpaper.Theerror,accordingtoEureka,isthattheCityshouldhavebeen <br />chargedfortheremaining"processingfeegap"forpapermaterials.Sincepriceshadfallento <br />CityofArdenHills <br />CityCouncilMeetingforMarch30,2009 <br />CC <br />P:\PlanningIRecyclingGarbagel20091033009-Report-EureknContractDiscussion.doc <br />Page2of4 <br /> <br />