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Even though little of Milwaukee’s recycling ends up in China, that country’s abrupt halt in purchasing low quality or dirty materials is hitting the city’s budget.
Department of Public Works sanitation services manager Rick Meyers told members of the Common Council’s Public Works Committee that Resource Recovery Systems, the company the city works with, lost more than $1 million in the last year handling the city and Waukesha County‘s recycling.
The city and Waukesha County partnered on a new facility in 2015, operated by Resource Recovery Systems under a 10-year contract. But the company approached Milwaukee in light of the falling prices for materials and the resulting increased handling costs.
“We poured over their contract, and at this time feel it’s appropriate to renegotiate,” said Meyers. “In brief, it costs more to process to the quality standards in the market.” In order to increase the quality of the various bulk materials sold, operations have slowed down at the Materials Recovery Facility and staffing has been increased. Much of the city’s recycling is sorted by hand on a line that moves at 125 feet per second.
Before China exited the market, governments across the country could count on a steady stream of revenue from selling everything from milk jugs to old newspapers. Milwaukee, which benefits from its proximity to Wisconsin’s paper mills and other industrial users, must now increase the quality of its materials by better sorting and cleaning them in order to derive the same amount of revenue.
“We have been spending less than $1 million a year in processing costs and then we receive revenue that exceeds that,” said Meyers. The city projects to receive $1.58 million from the sale of recycled materials in 2019 according to budget.
But the city’s processing costs will now grow to $1.46 million said Meyers, expanding the budget of the approximately $10 million recycling program. According to a report presented to the council by Meyers in 2018, the city’s recycling program cost $10 million to operate in 2017, with a net expense of $4.7 million after revenue from selling material, state grants, and avoided landfill disposal costs were factored in. Meyers projected an $800,000 loss of revenue in 2018.
As a result, Milwaukee will increase its per-ton payment to Resource Recovery Systems by $17.89, up from approximately $36. The change, based on the 25,500 tons city residents are expected to recycle this year, will cost the city an estimated $457,000 annually. Waukesha County will approve a similar increase.
The government entities will also be paid differently based on material sales. Currently revenue is split, with 80 percent going to Milwaukee and Waukesha County and 20 percent to Resource Recovery Systems. Sale prices have averaged approximately $100 a ton said Meyers, but the agreement will be modified from percentages to absolute dollars to limit the risk for the for-profit contractor.
Under the new agreement, the contractor would keep the first $20 and any remainder would go to the government entities. “It protects the contract on the real downside of the market,” said Meyers. “On the flip side, we take more of the reward as it goes higher.”
The revised contract was approved by the committee unanimously and must be approved by the full Common Council.
The contract change comes as a number of cities across the country, including Philadelphia and Memphis, are abandoning their recycling programs.
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Related Legislation: File 190151