1D, Eureka Contract Payment Terms Discussion

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$30 per ton, Eureka claims the City is now responsible for the $45 per ton gap to cover the $75 per ton processing fee. Since the revenue from aluminum would not be sufficient to cover the gap, the City would have owed an additional $2,407.35 in December 2008. Eureka waived the December processing fee due to their error on the invoice. In January, the additional processing fee would have added $1,599 to the invoice and in February the processing fee would have added $1,508. Since Eureka has provided the required recycling services, the undisputed per household fee has been paid, which is $7,552. These additional processing fees have not been paid. Recvclin2: Bud2:et Impact The budgeted cost of the 2009 recycling program is $118,677, which includes the curbside recycling program, two community cleanup events, and administrative expenses. This budget is funded by the annual recycling fee, the SCORE Grant, and any revenue share. For 2009, the annual fee is $32 per participating household, the SCORE grant is $19,866, and the estimated revenue share was $20,530. The total budgeted revenue was $119,404. Due to the declining recycling market, the revenue share will be short in 2009. However, in anticipation of a possible decline, the recycling reserves can compensate for the loss of revenue share. The recycling budget is a self-funding enterprise fund. The budget did not anticipate additional processing costs in 2009. If this processing fee'were to continue through the end of2009, the budget could potentially be short by $20,000 to $25,000 depending on the recycling market. This translates to a cost per household of$3.57-$3.91 from the budgeted $3.06. Options Upon reviewing the contract, staff and the City Attorney do not agree with Eureka's interpretation of the contract. As noted in the report, staffhas not authorized payment of the "processing fee gap" requested by Eureka, and we do not recommend paying the "processing fee gap" on previous or future invoices. Using Eureka's reading of the contract, much of the risk and unpredictabi1ity is placed on the City. The City chose Eureka despite the lower monthly price from three of the four competing proposals. The risk to the City was the potential for no revenue share in any given month, which would require the City to pay the full monthly fee. If the City does not pay the processing fee that Eureka contends is part of the contract, they did indicate during our meeting on March 13 that they would need to pursue section 25 of the contract that allows them to declare a material economically unfeasible to collect (see page 8 of Attachment 1 for more detail on this process). If they pursue this portion of the contract, residents would no longer be able to recycle paper and it would be left behind in the bins. It would be possible to reintroduce paper recycling if the market improved in the future; however, City of Arden Hills City Council Meetingfor March 30,2009 \ \Ahdocsl\ah\AHdata\Planning\Recycling & Garbage\2009\033009 - CC Report - Eureka Contract Discussion. doc Page 3 of 4