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REQUEST FOR COUNCIL ACTION Date: October 7, 2019 Item No.:7.d Department ApprovalCity Manager Approval Item Description: Discussion of Recycling Fees 1 B ACKGROUND 2 The City prides itself on being a leader in recycling, and has a very robust program. Currently 3 Roseville offers service to single unit, multi-unit, and also collects recycling in the parks with a 5- 4 year agreement with Eureka Recycling. The City also offers an Opt-In program that allows small 5 businesses and faith organizations to opt-in to our recycling program if their composition is similar 6 to a residential unit. 7 Since 2002, the City averages 3,300 tons of recycling per year. As the recycled material is a 8 marketable material, the City has had a Revenue Share with our contracted hauler. This revenue 9 share allowed the City to receive a portion of the money from the sale of the materials. The revenue 10 share model has been in place since 2006 where the City has collected over $919,000 that was used 11 to offset the quarterly fee charged to the residents. The revenue share is the remaining money the 12 contractor pays to the City, after it is used to pay processing costs of the Material RecoveryFacility 13 (MRF). 14 In 2014, the local glass market was hit with the closure of E-Cullet, a glass processor in Saint Paul. 15 The closure reduced the local capacity to process glass and the markets had to adjust by shipping 16 excess glass to Chicago. Shipping the material to Chicago shifted our commodity price from 17 $15/ton in revenue, to a $20/ton expense. 18 In October 2017, China enacted strict standards (called the National Sword) on material entering 19 their Country to reduce the amount of residual (trash) that was being sent with the recycled materials 20 that go to manufacturing. By creating these standards, U.S. markets had to adjust how material is 21 processed to create a cleaner bale that could be marketed. Now there are millions of tons of material 22 stockpiled in the Country and that has driven down commodity markets. 23 With the downturn in markets, the City has seen a shift from a positive revenue share to a negative. 24 This negative revenue share means the City has to pay additional money to the contractor each 25 month to cover the costs of processing the material at the MRF. 26 In 2016, the City executed a new five-year contract with Eureka Recycling that reduced the revenue 27 share to 80% of the total revenue generated from the sale of the recycled material (it was previously 28 100% under the 2013-2016 contract). At that time, we were starting to see the erosion of the value 29 of recycled materials and we asked Eureka to offer a rate without revenue sharing. Eureka offered a 30 new rate which was twenty cents higher than the proposed contract rate for 2017 ($2.56 for no 31 revenue sharing vs $2.36 with revenue sharing). At that time, we had seen some reverse revenue 32 months (where the revenue did not cover the full processing costs), but not enough to justify an 33 additional $37,441 in base costs. Therefore, the City elected to award the contract with the Revenue 34 Share model and the $2.36 per unit cost. Page 1 of 3