1D, Eureka Contract Payment Terms Discussion

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Staff met with Eureka on May 4, 2009, where they recapped the downturn in the recycling market and restated their position on the processing costs. Eureka did not accept the City's counterproposal, and they withdrew the offer described in their March 23, 2009, letter. That previous proposal from Eureka had offered to remove the processing fees if the City gave up all rights to future revenue; however, the letter required the City to recognize that Eureka was entitled to the processing fees. At this meeting, Eureka stated that they would pursue Section 25 of the contract if the processing fees go unpaid because paper has become unfeasible to collect under the City's interpretation of the contract. If Eureka were to pursue Section 25, they would need to provide a formal 30 day notice to the City. During that 30 day period, the City and Eureka would need to negotiate a contract amendment that eliminates a material, likely paper, from the recycling mix. If a contract amendment is not negotiated within the 30 daY'period, the City becomes responsible for paying the disposal costs incurred by Eureka. Should paper be removed from the recycling mix, the contract amendment would need to address who is responsible for informing and educating residents. At our May 4 meeting, both sides agreed that removing paper from the recycling mix remains an undesirable outcome. Options In continuing conversations with Eureka, they have indicated a willingness to discuss restructuring the processing fees. Based on Eureka's interpretation, the City is required to pay $75/ton for paper and $150/ton for aluminum regardless of revenue. There may be a middle ground on these processing fees where the City agrees to pay a portion of future processing fees to keep paper in the recycling mix. Staff has not formally begun these negotiations since it was outside the guidelines provided by Council on March 30. At this juncture, the options are as follows: 1. Pay the processing fees claimed by Eureka to ensure that paper remains in the recycling mIX; 2. Authorize staff to negotiate a restructuring of the processing fees to determine if there is a middle ground that will keep paper in the recycling mix; 3. Maintain that the City is not responsible for the processing fees. This stance could lead to two outcomes: a. Eureka begins the process of removing paper from the recycling mix (Section 25 of the Contract); b. Eureka could request arbitration proceedings to resolve the dispute. The judgment of the arbitrator would be final (Section 42 of the Contract). City of Arden Hills City Council Work Session for May 18, 2009 \ \Ahdocs 1 \ah \AHdata\Planning\Recycling & Garbage\2009\051809 - CC Report - Eureka Contract Discussion. doc Page 2 of3