CC - Item 6A - First Amendment to Exclusive Franchise Agreement for Comprehensive Refuse ServicesROSEMEAD CITY COUNCIL
STAFF REPORT
TO: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: GLORIA MOLLEDA, CITY MANAGER . y.1 . M
DATE: NOVEMBER 13, 2018
SUBJECT: FIRST AMENDMENT TO EXCLUSIVE FRANCHISE AGREEMENT
FOR COMPREHENSIVE FEFUSE SERVICES
SUMMARY
Staff is seeking direction from the City Council regarding a request for special rate adjustment
from the City's franchise solid waste hauler, Republic Services. Republic Services has requested
a onetime rate adjustment on residential and commercial accounts due to the international
recycling commodities market crisis spurred by China's National Sword legislation. Based on
the City's recyclable material stream, current commodity pricing, and increased processing cost,
Republic Services is proposing a recycling rate adjustment of $.62 per residential account per
month to cover the additional cost of processing recyclable materials as well as the significant
loss in material value from sale of recyclable commodities.
STAFF RECOMMENDATION
That the City Council approve the First Amendment to Exclusive Franchise Agreement for
Comprehensive Refuse Services and Resolution No. 2018-67.
In January 2018, the People's Republic of China reduced the maximum contamination on all
incoming recycled material shipments levels from a previous 10% to 0.5%, effective March 1,
2018. Such contamination is monitored at the port upon arrival of incoming recycled material
shipments and is subject to return to its shipment source if higher levels are determined to be
found. The policy has been said by some leading industry experts to be `virtually impossible" to
attain. This policy, known as the National Sword, has essentially eliminated the end destination
market for Republic Services' recycling materials as well as most of California's recyclables.
China has further restricted all imports of recyclable materials from the United States for the
month of May 2018, which has further limited the available markets for recyclable materials,
primarily mixed paper. Although exemptions have been requested, the Chinese government will
not approve a divergence from this standard. While countries such as Vietnam, India, Malaysia
and Turkey have accepted recyclable materials for processing before China's National Sword
Policy, these countries are now overwhelmed with material diverted from China's market. This
has caused a crisis in the recyclable market leading Republic Services to request a surcharge on
its residential and commercial customers to increase the revenue, previously generated by the
sale of recyclables, needed to continue to provide service to the City and its residents. Republic
Services has requested a onetime increase to a recycling rate adjustment of $.62 per residential
AGENDA ITEM NO. 6.A
City Council Meeting
November 13, 2018
Page 2 of 2
account per month. Attachment A is the Republic Services' request letter, which includes a
spreadsheet outlining the rate adjustment calculations which provide details on additional
processing costs and the change in value of the City's recycling material stream. Attachment B is
a letter from CalRecycle, which outlines the issue and addresses concerns expressed by local
governments.
Below is a rate chart of the surrounding cities, the City of Rosemead is still one of the lowest in
the area. With the recycling rate adjustment, the new rate will be $19.60 per month.
City
Residential
Rate
Rosemead
18.98
El Monte
30.99
Temple City
35.90
San Gabriel
34.37
Monrovia
30.03
Alhambra
23.04
Monterey Park
26.99
West Covina
31.52
Covina
29.30
Sierra Madre
32.10
Irwindale
29.66
FINANCIAL REVIEW
If the City approves Republic Services surcharge request, residential monthly rates would
increase by $.62, effective December 1, 2018.
Attachments:
A. September 13, 2018, letter from Republic Services
B. May 8, 2018, letter from CalRecyle
C. Resolution No. 2018-67
D. First Amendment to Exclusive Franchise Agreement for Comprehensive Refuse Services
Attachment A
September 13, 2018, Letter from
Republic Services
q9 'A REPUBLM
SERVICES
September 13, 2018
Gloria Molleda
City Manager
City of Rosemead
8838 E Valley Blvd
Rosemead CA 91770
Subject: Recycling Market Update
Mrs. Molleda
As you know, recycling markets have undergone a major shift over the past nine
months due to changes in Chinese policy known as "China Sword" In an effort to be
more sustainable, China dramatically changed the criteria to accept imported
recydables. China significantly reduced acceptable contamination levels in any
recovered paper and plastic grades. In addition, China banned all mixed paper from
import, regardless of contamination levels. For decades, China has been the largest
importer of the world's recycled commodities, with the U.S. accounting for 40% of
their inbound stream. The change in China's policy has dramatically affected the
recyclable commodity sales market in California and the world.
In an effort to continue to move final product, Republic Services slowed processing
speeds at our material recover facilities (MRF) and added human resources to our
sort lines to further reduce contamination. Our material marketing team is actively
exploring other domestic and international markets; however, many markets are
flooded by the global industry shifting away from China. Through these efforts we
have successfully continued to move material, however at a significantly reduced or
negative price and higher processing cost.
China Sword caused an increase in processing cost and a significant decrease in the
price paid to recyclers for commodities, specifically the price of fibers (OCC, ONP,
mixed paper). For example, the previous three year average price for a ton of mixed
paper was $96.96, Last month's average price for a ton of mixed paper is $3,62 YTD.
Republic Services has borne the increased processing cost and lost revenue over the
past nine months in hopes that markets would return to historical norms.
Unfortunately, it appears there is a permanent structural break in the recyclable
commodity markets. Local and regional recycling processing partners are shuttering
their facilities, putting additional strain on Republic's infrastructure. The increase in
cost, loss of revenue, and increase material flow through our MRFs at the prices we
are being paid for commodities today is not sustainable.
Republic Services is requesting a onetime rate adjustment on residential and
commercial accounts. Based on the City's recyclable material stream, current
commodity pricing, and increased processing cost, Republic Services is proposing a
recycling rate adjustment of $.62 per residential account per month and a .44%
increase per month to commercial accounts to cover the additional cost of
processing recyclable materials as well as the significant loss in material value from
sale of recyclable commodities. Attached is a spreadsheet outlining the rate
adjustment calculations which provide details on additional processing costs and the
change in value of the City's recycling material stream.
Attached are a number of documents to provide you with additional information and
background on China Sword and the changes to the recyclable commodity sales
markets.
I would like to reiterate our strong commitment to the City as your long term recycling
partner and as always, please do not hesitate to contact me with any questions or
concerns.
Sincerely, � f
Elizabeth Martinez
Municipal Relationship Manager
cc: Matt Niklas
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05
Attachment B
May 8, 2018, Letter from CalRecycle
California Environmental Protection Agency Edmund G. Brown Jr., Governor
Calftydel DEPARTMENT OF RESOURCES RECYCLING AND RECOVERY
10011 STREET, SACRAMENTO, CALIFORNIA 95814 • WWW.CALRECVCLE.CA.GOV • (916) 322-4027
P.O. BOX 4025, SACRAMENTO, CALIFORNIA 95812
May 8, 2018
In light of recent changes to China's import policies, I'm writing to share an update on
California's recycling markets, answer questions regarding jurisdiction compliance, emphasize
the importance of health and safety at solid waste facilities, and discuss what lies ahead.
On May 4th, China stopped accepting any imports of recyclable materials from the United States
for one month. This decision follows China's implementation of its National Sword policy on
March 11, banning the imports of 24 categories of scrap materials including low grade plastics
and unsorted mixed paper, and setting strict contamination standards for allowable bales of
recyclable material. The exporting of recyclable commodities to China, primarily our traditional
curbside materials, has historically been a key component of California's recycling
infrastructure. Approximately two thirds of curbside collected material is exported to foreign
markets. In 2016, 62 percent of the exported recyclable materials were sent to China. However,
China's implementation of National Sword is a major disruption in recycling commodities
markets, a signal that California can no longer be primarily reliant on exports to manage our
recyclable materials.
These new policies provide California with an opportunity to take a couple of important steps:
first, to reduce our waste, and second, to work together to build infrastructure and domestic
markets to successfully and responsibly manage our recyclable materials. Each of these will
take investment and collaboration across state and local governments, the solid waste industry,
manufacturers, and rate -payers. These are critical steps to improve the environment and
economy here in California and beyond, although they will take time.
We're already witnessing the effect of China's new policy. Material flow is significantly disrupted
and the economics of recycling are unfavorable for many recyclable commodities, challenging
what recycling means to Californians.
This letter is intended to address concerns I have been hearing from local governments and
industry about the impacts of China's import policies. I would like to reassure local governments
that we have existing statutory policies to address the impact of markets when determining
whether or not a jurisdiction has made a good faith effort to implement its diversion programs for
compliance with AB 939. 1 am aware that facilities are having a hard time moving recyclable
materials and are keeping them on site in significant quantities. If facilities are temporarily
storing materials for longer periods, public health and safety should be their number one priority.
Finally, looking toward the long-term, we will need more domestic infrastructure to manufacture
products using California's recycled content feedstock. This valuable infrastructure will not only
support the domestic recyclable commodities market but also support SB 1383's goal to reduce
disposal of organic waste by 75 percent.
ORIGINALPRWi DW IW%MSTCONSU ERCOM TRO Cf1LONNEPHEEPAPER
May 8, 2018
Page 2
Let me expand on these points.
Given shifting markets for recyclable commodities, it is important to clarify that CalRecycle takes
market conditions into consideration when evaluating a jurisdiction's compliance with the
following state recycling laws; AB 939, mandatory commercial recycling, and mandatory
organics recycling. I have heard many stakeholders express concerns that CalRecycle will not
take market factors — e.g., the precipitous drop in ability to get collected materials to market at
an adequate price or even at all — into consideration when we evaluate jurisdiction programs.
Jurisdictions are concerned that this could lead to potential penalties for situations that
jurisdictions cannot control. This is not what statute dictates. Specifically, under existing
statute, regulations, and policy, CalRecycle already takes market conditions into consideration
when determining "good faith effort" in evaluating each jurisdiction's program implementation.
CalRecycle recognizes that over the short term, lack of markets is not indicative of a
jurisdiction's efforts to implement its programs fully. Additionally, a jurisdiction's achievement of
its 50 percent requirement is not determinative for assessing compliance. Instead, CalRecycle's
jurisdictional review focuses on program implementation and includes the assessment of
barriers a jurisdiction is facing, including a lack of markets.
The following is an overview of the applicable statutes, regulations, and policies utilized when
evaluating a jurisdiction's performance. I am providing you with this level of detail because it is
descriptive of how we have reviewed jurisdiction program implementation in the past and how
we will continue to do so in light of National Sword.
California Public Resources Code 41825(e)(3) establishes that CalRecycle must consider the
enforcement criteria included in its enforcement policy, known as the Countywide Integrated
Waste Management Plan (CIWMP) Enforcement Policy Part II. This is the guiding process for
determining compliance for a number of programs. CalRecycle periodically revises this policy to
incorporate the goals of new statutes, as it did for AB 341 and AB 1826. Staff uses the criteria
delineated in the policy to determine the extent to which a jurisdiction has implemented, or
shown a good faith effort to implement, its selected diversion programs. Staff also uses the
identified criteria to assist local jurisdictions who may need help in identifying why
implementation of diversion programs is failing to achieve the results expected, or is failing to
meet the diversion requirements. We want jurisdictions to be successful in implementing
diversion programs.
The CIWMP Enforcement Policy Part II specifically includes consideration of markets for AB 939
Source Reduction and Recycling Element (SRRE), Mandatory Commercial Recycling (AB 341)
and Mandatory Commercial Organics Recycling (AB 1826) compliance review. The following
are some of our current review processes and the factors we consider when determining if a
jurisdiction has met their diversion goals.
AB 939 review: As part of the review process, CalRecycle investigates the extent to which a
jurisdiction has tried to meet the diversion requirements through its selected diversion programs,
and the reasons it has failed to implement some or all of those diversion programs. Staff uses
the criteria in the Enforcement Policy to assess the specific conditions that may have prevented
a jurisdiction from meeting its 50 percent equivalent per capita disposal target, and whether a
good faith effort was made by the jurisdiction to meet the requirements. The analysis for a
jurisdiction that is not meeting its 50 percent target includes considering availability of markets
and specific criteria can be found here: CIWMP Enforcement Policy Part Il, pages 4 and 11.
Mandatory Commercial Recycling (MCR) and Mandatory Commercial Organics Recycling
(MORe) review: CalRecycle also reviews jurisdictions' implementation of their MCR and MORe
May 8, 2018
Page 3
programs. If a jurisdiction has not been able to implement a commercial recycling program that
is appropriate for the jurisdiction and meets the needs of its businesses, CalRecycle looks at a
number of factors in assessing whether the jurisdiction has made a good faith effort to
implement these programs. These factors include the impact of markets and the efforts the
jurisdiction has made to investigate local and regional marketing options and recycling
opportunities with the private sector. More specifics can be found in the CIWMP Enforcement
Policy Part II. page 22 re: MCR and 28-29 re: MORe , and PRC 42649.3(1)(5) and
42649.82(h)(6) and 14 California Code of Regulations §18839.
Health and Safety Considerations Associated with Storage
We understand that National Sword is causing back-ups and longer storage times of processed
recycled materials at solid waste facilities and recycling centers. Solid waste facility operators
can discuss potential permitting options or request a Solid Waste Local Enforcement Agency to
grant a temporary waiver of storage restrictions. The waiver would allow additional amounts of
recyclables and longer timeframes to store recyclables at the solid waste site as long as the
additional storage does not create public health and safety or environmental issues. The
process for requesting and processing a temporary waiver is found in state solid waste
regulations. In addition, public health and safety is a priority at solid waste facilities and
recycling centers. Several industry sources have published best management practices for the
storage of baled recyclable materials. We've provided a synopsis of these practices below:
Have a Storage Management Operations Plan describing procedures for receiving,
storing, and shipping baled recyclables.
• Unload baled recyclables by forklift and stack in a specific storage area in a configuration
that provides for long-term stability. If applicable, stacked bales may be overlapped or
staggered to improve the stability of the stacks. Height of the bales should be no greater
than four bales high.
• The bale storage area should allow forklift operators to safely move materials and allow for
the safe loading of trailers that are picking up bales of materials.
To prevent contact with storm water, and to control vectors and nuisance, the following
may be employed:
• Limit bale contact with the ground (e.g., on pallets and/or tarps)
• Maintain facility cleaning, housekeeping and litter control
• Remove putrescible material, if observed
• Maintain heavy equipment to ensure no oil or fuel leakage occurs; clean up spills or leaks
immediately
• Establish a first in/first out material handling process
• Where necessary, place berms or other structures to divert storm water from coming into
contact with bales
Fire Hazard Mitigations:
• Consult with your local fire district to employ fire hazard mitigations
• Keep adequate heavy equipment available on-site: (e.g., front loaders, bulldozers, water
trucks, bobcats), fire hoses, dedicated fire pump and water tanks, and fire extinguishers.
• Identify a maximum size of the storage area including length/width/height.
• Maintain appropriate spacing between piles and the perimeter, maintain fire lanes
• Inspect piles daily for potential fire hazards
• Monitor pile temperatures at least once a week
Coordinate with the Local Enforcement Agency and any local or state authorities responsible for
the regulatory oversight of the facility.
May 8, 2018
Page 4
For further information on best practices for storing materials, here are some additional
resources from Waste 360 and Environmental Protection Authority, Victoria.
Reducing Waste and Increasing Domestic Infrastructure
Reducing the generation of waste before it enters the waste stream reduces costs and
conserves resources. Manufacturers, consumers, and governments all have a role to play in
reducing waste. For example, manufacturers can reduce unnecessary packaging on products,
consumers can choose to use reusable instead of single use, disposable products, and local
government can procure products with recycled content. Waste prevention has the potential to
reduce reliance on foreign markets, as there is no need to export what California has not
generated. We will continue to work with you and all stakeholders to develop waste prevention
opportunities and policies. With that said, we will continue to generate a significant amount of
materials in California. Upstream solutions will need to be paired with the development of
domestic processing and manufacturing for us to successfully manage our recyclables.
Building infrastructure to handle the materials we collect now, and the even greater amounts we
will need to collect when SB 1383 goes into effect, is a daunting long-term task that will take
years to achieve. Given the unpredictability of the marketplace, it's even more important that
state and local governments and the private sector begin making siting and investment
decisions now to develop more domestic (California and the U.S.) infrastructure for
manufacturers using recycled content feedstock.
As CalRecycle communicated in January, we are committed to using our available resources to
help build a more robust materials processing infrastructure in California. CalRecycle currently
provides funding through its greenhouse gas (GHG) grant and loan programs and Recycling
Market Development Zone program (RMDZ), and we work closely with the Governor's Office of
Business and Economic Development (GO -Biz) to assist manufacturers that want to site or
expand their operations in the state. Over the past four years, the GHG grant program has
provided $86 million in funding to 31 recycling projects and the GHG loan program has provided
$1.5 million in funding for two projects for construction, renovation, and expansion of new in-
state capacity. The RMDZ loan program has provided $145 million in funding to 192 recycling
manufacturers in the state, since inception of the RMDZ loan program in FY 1993-94. There is
increasing enthusiasm from companies interested in utilizing California's waste stream to make
new products such as compost, biofuels, fibers and plastics. I urge you to take advantage of
these.
Another opportunity to support manufacturers using recycled content feedstock is for
jurisdictions to ensure their General Plan includes these types of facilities in their land use
element. Just last year the California Governor's Office of Planning and Research (OPR)
completed the first comprehensive update to the General Plan Guidelines (GPG) since 2003
(General Plan Guidelines Update, Completed August 2, 20171. One of the major changes
includes an expanded section addressing the need for additional recycling, anaerobic digestion,
composting, and manufacturing facilities in the land use element. This new guidance provides
examples for local jurisdictions to use when updating their General Plans. Additional
information is on the OPR General Plan Guidelines website. You can stay informed about
GPG-related information by signing up for the GPG email list.
May 8, 2018
Page 5
Next Steps
CalRecycle will host a workshop in Sacramento in early June to encourage dialogue and share
information about the impacts of China's import policies. Workshop details will be posted on our
National Sword website. We will use this convening as an opportunity to discuss changing
market dynamics, impacts on facilities, domestic capacity for processing and manufacturing
using recycled content, and to identify other short and long-term solutions to the current
recycling challenges. This is not the first time the international recycling commodities market
has faced a major disruption and it won't be the last. California must capitalize on these
disruptions and turn them into an opportunity to strengthen our environmental resilience and our
economy. This will require us to reassess product design, materials collection, and processing
systems. I look forward to working with you to build a more sustainable recycling infrastructure
in California.
Scott Smithline
Director
Attachment C
Resolution No. 2018-67
RESOLUTION NO. 2018-67
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
ROSEMEAD, CALIFORNIA, APPROVING THE FIRST AMENDMENT
TO THE EXCLUSIVE FRANCHISE AGREEMENT FOR
COMPREHENSIVE REFUSE SERVICES WITH CONSOLIDATED
DISPOSAL SERVICE RELATING TO RECYCLING FEES
WHEREAS in 2012 the City and Contractor entered into an Exclusive Franchise
Agreement for the provision of comprehensive refuse services, and
WHEREAS the Contractor has made outreach and presentations to the City Council
explaining the major shift over the past year relating to recycling markets as a result of the Chinese
Government's policy known as "China Sword", and
WHEREAS this policy change has significantly reduced China's importation of recyclable
materials and created a substantial increase in processing costs and decrease in prices paid for
recyclables to Contractor, and
WHEREAS due to the China Sword Policy's impact on the cost of operations, the
Contractor has approached the City to ask for a one time recycling rate adjustment of a not to
exceed amount $.62 to residential users a month and .44% to commercial users per month, and
WHEREAS pursuant to Section 26.2 of the Agreement the Contractor is permitted to ask
for an increase due to the occurrence of an event or circumstance that substantially increases
Contractor's cost of service, or otherwise substantially and negatively impacts Contractor's
provision of services, and
WHEREAS the City Council is authorized to approve amendments to the Agreement.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ROSEMEAD, DOES
HEREBY RESOLVE, DECLARE, DETERMINE, AND ORDER AS FOLLOWS:
SECTION 1. City Council does hereby approve the First Amendment to the Exclusive
Franchise Agreement for Comprehensive Refuse Services with Consolidated Disposal Service as
attached hereto as Exhibit A.
SECTION 2. The City Clerk shall certify to the adoption of this resolution and hereafter
the same shall be in full force and effect.
PASSED, APPROVED, AND ADOPTED this 13 day of November, 2018.
Steven Ly, Mayor
APPROVED AS TO FORM: ATTEST:
Rachel Richman, City Attorney Ericka Hemandez, City Clerk
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES) §
CITY OF ROSEMEAD )
I, Ericka Hernandez, City Clerk of the City Council of the City of Rosemead, California, do hereby
certify that the foregoing City Council Resolution, No. 2018- , was duly adopted by the City
Council of the City of Rosemead, California, at a regular meeting thereof held on the day
of , 2018, by the following vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
Ericka Hernandez, City
Attachment D
First Amendment to Exclusive Franchise Agreement for
Comprehensive Refuse Services
FIRST AMENDMENT TO
EXCLUSIVE FRANCHISE AGREEMENT
FOR COMPREHENSIVE REFUSE SERVICES
THIS FIRST AMENDMENT TO THE EXCLUSIVE FRANCHISE AGREEMENT
FOR COMPREHENSIVE REFUSE SERVICES originally entered into on August 28,
2012, is made and entered into effective the 13 day of November 2018, by and between
the City of Rosemead, a municipal corporation, hereinafter referred to as City, and
Consolidated Disposal Service, a Limited Liability Corporation, hereinafter referred to as
Contractor.
The City and Contractor agree to amend the Agreement based on the Recitals
provided for below.
WHEREAS the Contractor has made outreach and presentations to the City
Council explaining the major shift over the past year relating to recycling markets as a
result of the Chinese Government's policy known as "China Sword".
WHEREAS this policy change has significantly reduced China's importation of
recyclable materials and created a substantial increase in processing costs and
decrease in prices paid for recyclables to Contractor.
WHEREAS due to the China Sword Policy's impact on the cost of operations, the
Contractor has approached the City to ask for a one time recycling rate adjustment of a
not to exceed amount $.62 to residential users a month and .44% to commercial users
per month.
WHEREAS pursuant to Section 26.2 of the Agreement the Contractor is permitted
to ask for an increase due to the occurrence of an event or circumstance that
substantially increases Contractor's cost of service, or otherwise substantially and
negatively impacts Contractor's provision of services.
WHEREAS the City Council is permitted to approve amendments to the
Agreement.
Now therefore the following amendment is made to the Agreement:
In addition to the existing Rates for Service increases provided for in Section 8.1,
the City and Contractor agree to a one-time not to exceed rate adjustment on residential
and commercial accounts as follows:
• A recycling rate adjustment of up to $.62 per residential account per month
A recycling rate adjustment of up to .44% increase per month to commercial
accounts
• The above adjustments will be effective no earlier than December 1, 2018
All other terms of the Agreement remain unchanged.
IN WITNESS WHEREOF, the Parties have executed this Agreement, as of the
date first indicated above.
City CONTRACTOR
CITY OF ROSEMEAD CONSOLDATED DISPOSALSERVICES, LLC
A Municipal Corporation
0
ATTEST:
M M
Steven Ly, Mayor
Ericka Hernandez
City Clerk
APPROVED AS TO FORM:
LIM
Rachel H. Richman
City Attorney
2
Approved by:
is
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