8A, Approve Contract with Eureka Recycling

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With the fluctuations in the recycling market, it is difficult to estimate the budget impact for the remaining portion of 2009. If prices stay at May 2009 levels, the City will not owe any processing fees for 2009. If the prices fall back to January 2009 levels, which were the lowest since the contract started, the processing fees could total in upwards of $9,800 for the remaining seven months of the year. The recycling budget is a self-funding enterprise fund. The revenue comes from the SCORE grant and from fees collected through a special assessment on the property taxes. The charge per household in 2009 was $32. Due to the lack of revenue share in 2009, the annual fee and SCORE grant are unlikely to cover the expense of the program this year. However, the fund balance is anticipated to be able cover the revenue shortfall in 2009, even if the processing fees were to total $9,800. Staffwill continue to monitor the budget and fund to determine how the monthly household fee for 2010 may have to change to cover the expense of the recycling program. Recommendation Staffrecommends approval of the June 29,2009, amendment to the Contract Agreement Between City of Arden Hills and Eureka Recycling for Recycling Services effective for the June 2009 services. This amendment reduces the processing fees per ton of material, but it brings plastic, glass, and steel into the mix as potential revenue generators. While these additional materials are subject to processing fees, these materials also spread the price risk across more materials since prices can fluctuate separately. Moreover, the revenue and processing fees can be tracked more accurately to each material. Since the revenue share portion has been retained, the City could still claim revenue share if prices stay high enough. A return to the revenue levels of2008 is, however, unlikely. With the City covering the portion of the processing fees not covered by revenue, the materials that are collected are unlikely to change. A material would only be removed if market prices became negative, which essentially means the material is considered garbage by the industry. This contract amendment does have concessions from both parties, but it does add cost to the recycling program. It must be noted that if the recycling market declines more significantly than it did in the first part of2009, the additional materials could increase the overall processing fee costs to the City. Attachment A. Pages 7, 8, and 12 of the Contract Agreement between the City of Arden Hills and Eureka Recycling for Recycling Services B. June 29, 2009, Contract Amendment C. Recycling Articles (provided by Eureka Recycling) Metro-inet\ardenhills \Admin \CouncillAgendas & Packet Information 12009\06-29-09 - Regular Meeting - Eureka Recycling Contract Amendment Page 5 of5