Resource Recycling News

Houston recycling in jeopardy amid contract battle

Houston Skyline / KENNY_TONG, ShutterstockThe immediate future of Houston’s curbside recycling program is uncertain after city leaders rejected a proposed contract renewal with Waste Management.

The fourth-largest city in America currently contracts with Waste Management (WM) to accept recyclable materials delivered by city trucks to two WM MRFs. Every two weeks, trucks collect single-stream materials from more than 380,000 single-family homes. That pact is set to expire March 16.

The Houston City Council on March 9 rejected a new contract to replace the existing one. In a press conference following the City Council meeting, Houston Mayor Sylvester Turner said city leaders are committed to recycling, but residents may experience short-term recycling disruptions. He also mentioned a possible temporary reduction in recycling pick-up frequency to once per month.

“The City is still very much committed to recycling,” Turner said while announcing plans to provide the public with details on next steps on March 14.

Lisa Doughty, communications manager for Waste Management in Texas and Oklahoma, said the company remains willing to work toward an amicable agreement.

“We urge the mayor to recognize that a sustainable recycling program is one that works for the residents, the environment and the companies that are providing the service,” she said. “We’re one of the partners with our customers, and it takes the entire group, not one or the other.”

WM said it would be willing to charge a daily gate fee to accept materials at the MRFs should the sides fail to hammer out a new agreement.

Below the bottom line

The current agreement is a “zero floor” contract, through which the City and WM share profits when the value of the commodities sold exceeds WM’s sortation costs, but if they fall short, WM is responsible for the loss and the City pays nothing.

If no MRF existed to accept the materials, Houston would have had to pay $27 per ton to landfill the materials, a city document states.

WM says it is annually losing $1 million under the contract and has demanded a renegotiated deal eliminating the zero floor and requiring the City to fully compensate it for revenue shortfalls. The publicly traded, Houston-headquartered company also wanted to boost the processing fee in a proposed four-year contract by 46 percent to account for sortation costs

The resulting contract – the one City Council voted down – would have cost the city an estimated $3 million a year. The debated deal comes at a time when Houston is already facing budget shortfalls, including a $126 million budget deficit through this July.

“At the end of the day, Houstonians expect me to put forth or present the best deal for them that continues recycling and is consistent with the financial pressures that are on this budget,” Turner said.

Turner noted he has talked with WM competitors about serving Houston, saying that one company could ramp up operations in the city in three or four months, while others could accept “some” of the city’s recycling right now.

City Council isn’t scheduled to hold another meeting until after the March 16 contract expiration.

Criticism from the mayor’s office

Turner, who assumed the mayor’s office in January, characterized WM as being “heavy-handed” in negotiations with city officials. “What I’m not going to allow anyone to bully me or to force me into something that’s not in the best interests of the City of Houston,” Turner said.

Turner said he offered to split annual losses 50-50, with the city coming up with about $1.7 million and WM coming up with the same sum. He said the offer was refused.

He also proposed a shorter-term, one-year contract with an optional one-year renewal. But WM refused and sought a two-year contract with a one-year renewal costing the city more than $10 million total, he said.

“I’m going to be very careful with every dollar that we expend,” Turner said. “It’s always good to have a competitive field out there where there is more than one player.”

Waste Management responds

WM’s Doughty released a statement to Resource Recycling saying that the City can realize “hundreds of thousands of dollars” in savings under a new contract if it is able to reduce contamination from citizens’ rollcarts.

“The contamination in Houston’s recycling stream far exceeds national averages and the norm of other cities in our area.” the statement noted. “When prices stabilize and return to historical values, the costs of this contract to the City will shrink, and if commodity pricing continues to increase will become a cash-generating contract for the City.”

In an interview, Doughty said the gate fee at the MRFs would likely be about $104 per ton. This number would fluctuate based on costs and commodity values.

Other companies that previously held recycling contracts with Houston are now gone, she said, noting WM’s purchase in January 2013 of contracts and assets formerly belonging to Greenstar Recycling.

WM spent more than a year retrofitting a Houston MRF purchased from Greenstar Recycling to handle single-stream collections, she said, and it honored the contracts even though it meant losing more than $100,000 a month, Doughty said.

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