When an East Valley recycling facility burned down last fall, the City of Scottsdale’s sweetheart recycling deal went with it.
As other Valley cities cut back or outright cancelled their recycling programs due to rising costs over the course of 2019, Scottsdale was still bringing in around $10,000 each month from its program due to pricing floors negotiated into its contract with the Salt River Pima Maricopa Indian Community and its operator Republic Services years ago.
That $10,000 pales in comparison to the $97,275 the city made in just one month in 2017, but it was still preferable to the approximately $800,000 increase in annual cost the city would take taken on under a new proposed recycling agreement with City of Phoenix.
Scottsdale is just the latest Valley city to confront rising recycling costs.
Over the past two years, cities across the country have seen once-lucrative recycling contracts turn into fiscal liabilities.
The sudden drop in recycling revenues for cities was due to a global shift in the market resulting from a decision by China in 2018 to reject most recyclable materials from outside nations due to rampant contamination issues.
China’s decision cut off the U.S. and other nations from what had been the world’s single largest importer of recyclable materials over the past 25 years caused a steep drop off in the value of recyclable materials worldwide.
In July 2017, the market price for a ton of cardboard was about $250 per ton and by last July, it had fallen to $75, said Dan Worth, Scottsdale’s public works chief.
That drop in price, coupled with processing costs of around $75 per ton, meant cities began paying hefty sums to continue their recycling programs last year – a stark change from the reality just a few years ago.
Scottsdale was only able to maintain its modest recycling revenues in 2019 due to a $5 per ton commodity floor negotiated into its contract – meaning that no matter how far commodity prices fell, the city would receive at least $5 per ton for its recyclables through its contract with SRPMIC.
Last October, Worth told the Progress that equaled approximately $100,000 per year in revenue for the city.
Worth told the City Council that without those floors in place, Scottsdale would have actually paid $69 per ton to recycle its materials in September 2019.
Chandler is estimating it will spend up to $1.2 million on a one-year extension with its recycling contractor after bringing in around $500,000 in recycling revenues just two years ago.
Now, Scottsdale is in the same boat.
In late October 2019, the SRPMIC recycling facility that accepted Scottsdale’s recycling burned down. The fire was sparked by a lithium-ion battery and spread due to 60 MPH winds, according to a press release from the Town of Fountain Hills, which also sent its recycling to the Republic facility.
The fire left Scottsdale without a home for the city’s recycling.
Since then, Scottsdale has had to divert its recyclables to the landfill – meaning it’s not being recycled, Worth said.
Not only is the situation bad for the environment, it’s also costing the city money.
According to a City Council memo, landfilling the city’s recyclable waste costs $27 per ton.
That is not a permanent solution, though.
Worth said city is in the process of negotiating an intergovernmental agreement with City of Phoenix, which owns two recycling facilities operated by Republic Services.
Scottsdale’s recycling costs would go up by about $800,000 per year under the agreement, according to a City Council memo.
Under the agreement, Scottsdale will pay a $75 per ton fee that will be partially offset by the price the commodities can be sold for on the open market.
Worth told the Council on March 3 that the city received quotes from private providers, including Waste Management and United Fiber. However, he said the Phoenix IGA was the most cost-efficient.
“The primary benefit was that we could do it quickly, and it was the best price that we could find out there,” Worth said. “We’re not bringing out a proposal and competing it, (because) there’s very few entities that would be able to respond.”
“Compared to quotes that we’re getting from other sources, it was a good deal,” Worth said.
Council may consider the IGA with Phoenix on March 18, though it is unclear when the agreement will actually go into effect.
Yvette Roeder, a spokesperson for Phoenix Public Works, said there is not currently a timeline for the Phoenix City Council to approve the agreement.
“The earliest possible date would be some time April, but nothing has been included in any meeting agenda,” she said.
When it goes into effect, the Phoenix deal would be compatible with the city’s existing contract with SRPMIC, which runs through 2021, Worth said.
Scottsdale could still send recycling to SRPMIC under that old contract if the community rebuilds its facility.
However, even if the facility is rebuilt, the days of Scottsdale getting paid for its recycling are likely long gone.
The city was already renegotiating the contract when the facility burned down.
“We recognize that the market has changed (and) that our vendor is in a bind,” Worth said in 2019. “We want to continue providing the service. We don’t want to force them out of business, so we want to be reasonable.”
The two sides were already in negotiations last fall, though the city had rebuffed an initial proposal by Republic over concerns it transferred all risks from market volatility to the city.
City Auditor Sharron Walker audited the proposal from the company last year and found that it overstated processing costs by an average of 26 percent and overstated Republic Services’ losses by an average of 44 percent.
The audit found Republic failed to justify its projected costs and depreciated assets at an accelerated rate.
Worth declined to comment on the state of a new contract with SRPMIC, citing ongoing negotiations, though he said he doesn't believe SRPMIC would consider rebuilding its facility under the current agreement.
In any scenario, recycling costs are going to go up for Scottsdale residents.
Scottsdale’s Public Works Department is asking the Council to increase the solid waste rate for residents from $18.75 to $21.51 – an increase of 14.75 percent.
The increase is more than the 8.7 percent increase the department anticipated for residential services, and above the 3-percent across-the-board increase the department is asking for other services, such as commercial trash pickup.
Worth said that increase is almost entirely due to the increased recycling costs.
Worth said there were some concerns about whether or not Phoenix, or any facility in the Valley, had the capacity to potentially take on 100 percent of Scottsdale’s recycling.
Roeder said, “We do believe adequate capacity does exist to accept and process the material from Scottsdale.”
“Any agreement regarding recycling processing, however, would need to provide both municipalities with the flexibility to adjust operations to changing conditions, including facility capacity,” Roeder said.