1D, Eureka Contract Payment Terms Discussion

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~ ~HILLS MEMORANDUM DATE: May 18, 2009 Agenda Item 1.D TO: Mayor & City Council FROM: James Lehnhoff, Community Development Director SUBJECT: Eureka Contract Payment Terms Discussion Action Reauest Provide direction on continuing discussions with Eureka Recycling regarding the payment terms. Update At their March 30, 2009, meeting, the City Council provided staff with guidance to continue negotiating with Eureka regarding the disagreement in the payment terms of the contract. The memo from the March 30, 2009, meeting is attached to provide the background to this issue (Attachment A). The consensus of the Council was that the City does not agree with Eureka's interpretation of the processing costs in the payment terms portion of the contract. The negotiating guidelines from the Council directed staff to prepare a counterproposal that kept paper in the recycling mix and kept a portion of revenue share. The City has not paid the processing costs claimed by Eureka, though the City has continued to pay the base monthly cost. A counterproposal was sent to Eureka on April 6, 2009, that requested the removal of Section 25: Lack of Adequate Market Demand from the contract, reduced the City's revenue share to 25 percent from 50 percent, and specifically allowed Eureka to use surplus revenue from one recycling material to cover the processing costs of another material if overall processing costs exceeded overall revenue (e.g. revenue from aluminum could be used to cover the processing costs from paper). Section 25 is the portion of the contract that describes a process of removing a material from the recycling mix if it is no longer economically feasible to collect, process, and market. City of Arden Hills City Council Work Session for May 18, 2009 \\Metro-inet.us\ardenhills\Admin\Council\Agendas & Packet Information \2009\05-18-09 Worksession\Packet Information \051809 - CC Report- Eureka Contract Discussion.doc Page 10f3