06-23-1997 Council Packet - Laserfiche WebLink

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COUNCIL MEETING \ REQUEST FOR COUNCIL ACTION Department Approval: Name Ron Moorse Title City Administrator JUN 2 3 1997 CfTYOFORONO DATE: June 17,1997 ITEM NO: Administrator Reviewed:Agenda Section: City Administrator's Report Item Description: Curbside Recycling Contract Extension for 1998 to 2000 The city has contracted with E-Z Recycling for the last 5 years to provide curbside recycling pickup in Orono. The current three-year contract will expire at the end of 1997. Amelia Kroeger, the West Hennepin Recycling Coordinator, and the West Hennepin Recycling Commission are recommending the contract with E-Z Recycling be extended for an additional three years through the yeai- 2000. a Cost The cost per household for the pickup service will remain at $2.04 per household per month. The total contract cost will increase based on the increased number of households. Based on a household count of2,737, Orono's annual billing for 1998 would be $67,001.76. Market Volatility The market generally provides some level of profit to the contractor for the various recyclable materials. For example; in 1995 the market for newsprint was very favorable. At tliat time the contractor initiated a revenue sharing arrangement through which the city would receive a share of increased revenues due to the very favorable market conditions. This revenue shari.''g agreement is now a part of the contract. Recently, there has been a substantial drop in demand for recycled materials, particularly newsprint and plastics. In the current market the contractor is unable to sell the newsprint and, in fact, is currently paying to recycle the newsprint. This is a good example of how market changes can significantly affect the economic viability of the recycling service and place contractors at some level of risk entering into multi-year contracts with fixed prices. In order to reduce this risk the recycling contractors have begun to request some level of cost sharing with cities during times of market dov' itums. The proposed contract includes a provision that if the contractor is paying more than $5.00 per ton to recycle newsprint the city will pay the contractor 50% of the increased market downturn cost. If the contractor is paying more than $40.00 per ton to recycle plastic containers with a neck, the city will pay the contractor 50% of the increased per ton market downturn cost. We are currently in a market downturn condition m relation to both newsprint and plastics.